TYPES OF MUTUAL FUNDS:

1. Close ended funds:

 In this scheme, the corpus of the fund, duration and the number of units are pre-
determined.
 Once the subscription reaches the pre-determined level the entry of investors is closed.
 After the expiry of the fixed period, the entire of the corpus is disinvested and
distributed to the various unit holders in proportion to their holdings.
 These units are publicly traded through stock exchange and there is no repurchase
facility by the fund.
 The main objective is capital appreciation.
 There will not be any redemption before its maturity, thus fund manager can manage
the investments efficiently and profitably without the necessity of maintaining any
liquidity.
 If the market condition is not favourable, it may affect the investor since he may not
get the full benefit of capital appreciation in the value of investment.
 It may attract more tax since entire capital appreciation is realized at one stage.

2. Open ended funds:

 The size of the fund and the period of the fund are not pre-determined.
 The investors are free to buy and sell any number of units at any point of time.
 The units are not publicly traded but the fund is ready to repurchase them and resell
them at any time.
 The main objective of this fund is income generation. The investors get dividend, rights
or bonuses as reward for their investment.
 These units are not listed in stock exchange, their prices are linked to the NAV (net asset
value), the NAV is determined by the fund and it varies by time to time.
 The fund manager has to maintain liquidity as he has to meet redemption demands at
any time during the life of the scheme.

3. Income funds:
 This fund aims at generating and distributing regular income to the members on
periodical basis.
 The main objective of this type of fund is to declare regular dividend (short term gains)
and not capital appreciation.
 The pattern of investment is oriented towards high and fixed income yielding funds like
debentures, bonds etc.
 This is best suited to the old and retired people who may not have regular income.
4. Growth funds:
 Growth fund concentrate on long run gains i.e., capital appreciation.
 The fund may declare dividend.
 The fund tries to get capital appreciation by taking more risk and investing on
risk bearing equities and high growth equity shares.
 This is best suited to the people who have highly risk bearing capacity and ability
to differ liquidity.

5. Balanced funds:
 Balanced fund is a combination of both income and growth funds. Therefore it is
also called as “income-cum-growth fund”.
 Its objectives are both distributing regular income and capital appreciation.
 The investment is balanced between the high growth equity shares and also the
fixed income earning securities.

6. Taxation fund:
 A taxation fund is a growth oriented fund but it offers tax rebate to the investors
either in domestic or foreign capital market.
 An investor is entitled to get tax 20% rebate in income tax for investments made
under this fund subject to maximum investment of Rs.10,000/- per annum.
 It is suitable to people who want to enjoy tax rebate in the month or February
and March.
7. Off-shore mutual funds:
8. Leverage funds:
 These funds are also called as “Borrowed funds”.
 They are used primarily to increase the size of portfolio of a mutual fund.
 When the value increases, the earning capacity of the fund also increases. The
gains are distributed to the unit holders.
 This is resorted to only when the gains from the borrowed funds are more than
the cost of borrowed funds.

9. Money-market mutual funds:

 These funds are basically open ended funds.
 The investment is made in money market instruments which are highly liquid
and safe securities like commercial paper, certificate of deposits, T-bills etc.
 Since MMMFs are new concepts in India, the RBI has laid down certain
regulations like entry to MMMFs is restricted only to scheduled commercial
banks and their subsidiaries.
 The re-purchase