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Mutual Funds can be categorized to different types of schemes based on various factors. The most common and often used categorization by the following factors:

1. Based on Structure of the Scheme
2. Based on the Asset Class invested in
3. Special schemes

Categorization by Structure:

There are commonly 3 structures used viz.

1. Open Ended Mutual Fund Schemes
2. Close Ended Mutual Fund Schemes
3. Interval Schemes

Open Ended Mutual Fund Schemes

Investors are free to invest or redeem their investments already  made from the scheme at any time. The investment and redemption happen based on the NAV that is declared on a Daily Basis by the Scheme based on the value of the Portfolio held by the Scheme.

Close Ended Mutual Fund Schemes

The Fund does not issue or redeem units on a periodic basis. Units can be bought only when the scheme is available for subscription during the initial offer period or New Fund Offer (NFO) period. Investor can redeem the amount invested only on the pre-determined maturity date declared by the scheme. These units are generally listed on a stock exchange and a person who wants to either invest or redeem in the scheme can do so by buying or selling the units on the stock exchange in which the scheme is listed. Unlike in a open ended scheme, where the price of purchase / redemption depends on the NAV, the price of purchase or redemption may not directly reflect the NAV and may be influenced by various market factors including demand and supply for the schemes units.

Interval Schemes

Interval Schemes are those schemes which combine the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

Categorization by Asset Class

The nature of the scheme is defined by the type of securities they invest in. The key asset classes are:

1. Equity Schemes
2. Debt Schemes
3. Hybrid Schemes

Equity Schemes

These schemes invest maximum portion of the corpus in equities of various companies. Normally, the objective is to provide capital appreciation and is generally suited for a long term investment. There could be different approaches within equity schemes depending on the approach, theme or the strategy that the scheme adopts for generating the capital appreciation. Some of the well known sub categories within Equity schemes are:

1. Diversified Equity Schemes: A pure equity schemes which invests in any equity across market cap, industry, sector or index.
2. Market cap based schemes : Focused large cap, mid cap and small cap schemes are available which invest in securities pertaining to the chosen market cap only
3. Sector based schemes: Focused sector investments wherein the scheme invests only in stocks pertaining to a sector eg. Banking,, Technology etc.
4. Index Schemes: Schemes which invest in an index / stocks in a particular index and aims to reflect the returns of the index
5. Theme Based Schemes: Specific themes like Dividend Yield, PE Ratio and other such strategic approach to investing is done by these schemes.

Debt Schemes

These schemes invest maximum portion of the amount collected in debt securities.  Generally, the objective of a debt scheme is to provide steady returns and income for the investor. There are different types of schemes available within debt schemes specifically based on the type of securities invested in. Some of the well known sub categories within debt schemes are:

1. Gilt Schemes: Schemes which invest in Government Securities Only
2. Tenure based schemes : Long Term, Medium Term, Short Term  and Ultra Short Term schemes
3. Floaters: Schemes which invest in floating rate securities
4. Specialty schemes

Hybrid Schemes

Hybrid schemes are ones  which endeavors to bring in the benefit of both Equity and Debt Schemes. These schemes invest depending on the objective of the scheme in both Equity and Debt securities in the pre determined range of asset allocation across these asset classes.

Special Scheme Categories

While Structure and Asset Class of the schemes cover the categories, there are certain special schemes which require specific mention. Some of these special categories of schemes are:

1. ELSS Schemes: These are schemes in which investment made qualify for deduction under section 80C of the Income Tax Act. These are Equity Schemes with a 3 year lock in from the day of investment.
2. Exchange Traded Funds: Exchange Traded Funds or ETFs are those which are available for investment and redemption only on the Stock Exchange Platform. There are ETFs in Equities, Gold or even Liquid funds.
3. Index Schemes: Schemes which replicate an index in its investment approach are called Index Schemes. Various schemes tracking Sensex, Nifty etc. are available. These can be both in the ETF as well as in the open ended platforms.
4. Gold ETFs: This is a category in which the investment made by the scheme is in ‘Gold’
5. Liquid Funds: This is a category of Debt schemes which focus on investing in a very short term instruments suitable for parking money for short periods of a few days to weeks.

An understanding of the categories of the schemes is very important in understanding and choosing a right scheme to invest in.

PowerMF has made its user interface so seamless that you have the flexibility to focus on the categories that you want to focus on. Also, as Close Ended Schemes and ETFs cannot be invested in through normal Mutual Fund Platform route, the ‘Add to Basket’ icon is not activated in order to communicate that this scheme is not available for investment on the platform. Also, you have the flexibility to focus your search on even the sub categories of the scheme so as to empower you to manage your investments professionally.

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