As many are having the wrong notion that mutual funds only invests in equities which was not the case as we are going to find out that Mutual Funds in India apart from investing in equities also invests in other avenues like bonds, debt, gold and other options.  There are around 16 types of mutual funds available in India offered by various AMCs.  You can find the same below:

Types of Mutual Funds

• Thematic equity funds
• Diversified equity funds
• Small & mid cap funds
• Equity link savings schemes (ELSS)
• Large cap equity funds
• Exchange traded funds
• Index funds
• Balanced funds
• Monthly income plans
• Long term income funds
• Fixed maturity plans
• Gilt funds
• Short term income funds
• Capital protection funds
• Ultra short term debt funds
• Liquid funds

Now we will look into each of the above mentioned type of funds in brief on what they are and how they invest.

Thematic Equity Funds

The Thematic Funds as the name suggests invests primarily only in a selected theme of companies in equity market, for example infrastructure mutual fund invests only in infrastructure related companies and similarly there are other thematic funds like banking funds, FMCG funds, pharma funds, etc. These funds are high risk and high return funds.

Diversified Equity Funds

These type of mutual funds invests across the board and companies in the equity market according to the asset allocation as specified.  It invests primarily in large cap, mid cap and small cap funds.

Small and Mid Cap Funds

These are the funds which invests mostly in the mid and small cap companies and hence it is ideal for the risk averse investors and not recommended for those who are new to MF in general.

Equity link savings schemes (ELSS) Funds

This is the tax saving mutual fund which helps you save on income tax under section 80C and there is a minimum lock in period of 3 years for this fund.  And also this fund will cease effective April 2012 as the new DTC comes into force which have cancelled the tax saving option for such schemes.

Large cap equity funds

As the name suggests this type of fund invests only the top of the crop or top 100 funds or follows either the SENSEX or NIFTY index and invests in the companies which have huge market capitalization for example like Infosys, TCS, SBI, etc.  Hence it is one of the better mutual fund type when it comes to equities fund.

Exchange traded funds (ETF)

These are the funds which can be brought and sold only via the stock exchange just as the name suggests.  For example we have the gold exchange traded funds, which invests in bullion in India, also there are other ETFs like NIFTY ETF, Bank ETF, Junior NIFTY, etc.  These Exchange traded funds only invests in their respective index funds or gold.

Index funds

These types of funds follow certain index and replicates the same when it comes to investment and hence the returns also will be almost similar to what that index offers.  For example there are index funds which follows either BSE SENSEX or S&P CNX Nifty and invests on those companies that falls in this index and the percentage of investment also will be replicated exactly according to the index that it follows.

Balanced funds

Such type of fund primarily invests a certain percentage of their portfolio in both equities as well as in debt, mostly it will be 50/50 but it may vary according to the specific fund’s allocation.  This is also ideal for those looking to enter the equities market via mutual funds as the risk involved in this fund is minimal compared to the large, mid and thematic funds.

Monthly income plans (MIP)

These monthly income plans are just like the post office offered MIPs but the only difference is that these mutual fund offered MIPs don’t actually guarantee you monthly returns as the name suggests but only offer you returns at a regular time.  These types of funds mostly invest in debt market but a certain percentage also in equities for better returns.

Fixed Maturity Plans (FMPs)

The Fixed Maturity Plans or FMPs as they are popularly known as are the closed ended funds which invests only in the secured bonds, debt and money market instruments over a period of time and gives you a return that follows these instruments.  This is the most widely brought funds right next to the regular equity funds offered by various mutual fund companies.

Capital protection funds

These are the latest armor that these MF companies have come up with which works just like the MIPs but the only difference being that it is closed ended and helps you on capital gains via investing in debt market while investing a certain portion (around mostly 30%) in equities for better returns and while the balance 70% of debt market investments helps protect your capital.  Although they don’t guarantee any fixed returns.

Long term income funds, Gilt funds, short term funds, ultra short term debt funds only invests in the more safer instruments like debt, government bonds, money market instruments and hence the returns too follows them.  The risk involved in such funds are very minimal.

Liquid Funds

These liquid funds are just like bank savings account which are best suited for the HNIs and others who want to invest for short term but yet get a better returns than what banks offer in the savings bank accounts.  Such funds have prompted mutual funds to even offer Mutual Fund  ATM Card.

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Objective

The objective of this scheme would be to invest up to 65% in equities and its related instruments while the balance up to 35% in gold ETF schemes available in India.  Thereby giving an added advantage of giving gold as a hedge against inflation even if the equities were not doing so well.

Asset Allocation

From 65% to 8% in equities and related instruments.  15% to 35% in gold ETFs.  0 to 20% in fixed and money market instruments.  The portfolio of this scheme will be rebalanced according to the valuation levels prevailing between the 3 investment opportunities available with this fund.

Options Available

Growth and dividend options (both payout and reinvestment)

Minimum Investment

The minimum investment amount to invest in this fund is Rs. 5000 and in multiples of Rs. 1 thereafter.  The minimum installment amount via SIP would be Rs. 250 per month.  No entry load applicable for this fund while there is a 1% exit load if redeemed or switched within 1 year of allotment of units.

There are very similar funds that have come up in the market like the Canara Robeco Indigo Fund.  This fund’s methodology can be ideal for those looking for an alternative portfolio with equities and gold investment via one fund.  But also remember that there will be additional charges involved due to the FOF mode of investment via the Gold ETF option of its 35% of investment portfolio.

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Benchmark: The actual benchmark that this fund follows is the Crisil MIP Blended Index.

Asset Allocation: 80-95% in debt and money market instruments, 5-20% in equities.

Options Available: Dividend payout and growth option.

NFO Details: The minimum investment is Rs. 5000 and in multiples of Rs. 1 thereafter.  There is a lock-in period of 3 years.  There is no entry or exit load for this fund as it will be listed in stock exchange.

The dual benefits work like giving stability and fixed returns from the debt portion of the investment and the equity portion will help you achieve the extra push needed for the additional income.  Apart from that this fund also helps you gain the indexation benefits for those in the higher tax bracket!  The 3 year lock in period helps the fund managers to get their call with a long term view and hence enhanced returns can be achieved.

The debt portion of this Reliance Dual Advantage Fund will be invested in the highest of quality debt and money market instruments while the equity part will be invested across the broad based portfolio of stocks.

This fund (Reliance Dual Advantage Fixed Tenure Fund I) looks like just another capital protection oriented fund but comes with a different name!  As, we have not been receiving not so too good reviews about the capital protection oriented funds, hence think twice before going for this NFO.  If you are really looking for stability and extra push on the equities, go ahead and try this fund else give it a miss.

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Kotak Gold Fund NFO

The Kotak Gold Fund is an open ended Fund of Funds scheme (FOF) that is going mostly going to invest in the Kotak Gold ETF.  For the liquidity purposes this fund will also invest in short term fixed deposit, money market instruments, etc.  The NFO is open from March 4, 2011 and it closes on March 18, 2011.  The reopening of this FOF is from April 5, 2011 in which you can buy the units as regular MF units.  The benchmark index for this fund is physical gold price.  Mr. Abhishek Bisen is the fund manager.

Gold being an excellent hedge against inflation can prove to be an ideal investment and surely has never disappointed in terms of returns for the investors.

Benefits of Kotak Gold Fund

• No need of demat account – Unlike the gold ETFs which compulsorily asks for a demat account to buy and sell, this Kotak Gold Fund does not need Demat account to buy.
• Buy Gold via SIP – Till now there was no option or choice or plan available for us to buy gold via SIP, but with this Kotak Gold Plan one can just give the standing instruction of as little as Rs. 1000 and continue for life long
• Liquidity – Unlike the real gold coins or bars the liquidity of Kotak Gold is very high you can sell the units on any business day and get the cash in your account within a day or two.
• Taxation – There are also taxation benefits as there is no wealth tax applicable if you buy gold via Mutual Funds.
• Low Cost – When compared with buying gold as jewellery, coins or bars.

Objective: The key objective of Kotak Gold Fund (KGF) is to generate income by way of investing in gold via the Kotak Gold ETF (KGEFT).

Asset Allocation: Up to 95% in gold (in KGEFT) and the balance 5% in money market, short term FD, CBLO or liquid schemes.

Minimum Investment: For regular purchase the minimum investment amount is Rs. 5000 and in multiples of Re. 1.  For SIP purchase the minimum monthly investment is Rs. 1000 (unlike Reliance Gold Savings Fund for which the minimum SIP amount being Rs. 100!).  The NAV of this fund will be Rs. 10 per unit during the NFO.

Investment Options: Growth and Dividend (reinvestment and payout).

Entry and Exit Load: There is no entry load for this fund but there is a 2% exit load if redeemed or switched within 6 months and 1% if redeemed between 6 months to 1 year.  While there is no exit load if redeemed or switched after 1 year of investment.

Expense Rate: This fund carries a double expense rate whereas the maximum total expenses for maintenance of this fund will be 1.50% as well as you should remember to add in the expenses of the Kotak ETF which may add up to 2.50% which makes the approximate total expense to invest in this gold fund as 3.5% which indeed is very high fee that you had to pay for investment in gold!

Hence think about these expenses and other factors and then decide about investing in Kotak Gold Fund.  My advice would be that if you have a demat account then you can go ahead and purchase the units of gold there itself rather than opting for this fund.  Else if you may not have time or patience to buy regularly from Gold ETFs then you can try this fund but try via the SIP option and see how good it performs if not then exit accordingly.

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Objective

The SBI Capital Protection Oriented Fund – Series 2 comes with an objective of investing in equity, debt and money market instruments as well as following a pattern in which it will help you protect your capital by investing 74 to 100% in debt and money market instruments.  It helps in protection of your capital but still giving an opportunity to help your money grow by investing some part in equities.  They will invest the debt portion only in the AAA or P1+ or equally rate schemes and hence security is assured.

Asset Allocation

Investing 0-26% in equities (market capitalized stocks of the BSE 100 Index) and equity related products and 74% to 100% in debt, debt related and money market instruments.

Minimum Investment

The minimum amount that you can invest in SBI Capital Protection Oriented Fund Series 2 during the NFO is Rs. 5000 and in multiples of Rs.1 thereafter.

Loads Structure

There is no entry as well as exit load for this particular NFO is nil.

Tax Efficiency

You can avail the indexation benefit and better returns post tax.  The long term capital gains will bear a tax of 20% with the the indexation benefit or the 10% without the indexation benefit.

Although many of them are skeptical about such capital protection oriented fund, but still if you are looking for the investment for long term horizon (say 5 years) but are afraid about investing directly in equities, you can try this fund where your capital is almost protected by investing in debt instruments while the 24% of your investment is tried at various equities in stock markets.  Although they are not guaranteeing any assured returns or not guaranteeing your capital protection, you should be well aware of the fact that just like any other mutual fund investments this fund too carry equal amount of risk and hence think about the same and invest in it.

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The NFO of Reliance Gold Savings Fund is open from February 14, 2011 (on Valentine’s Day) and closes on February 28, 2011.

Objective: The primary objective of Reliance Gold Savings Fund is to give returns that is very closely corresponding to that of the Reliance Gold ETF scheme provided by Reliance Asset Management Company.

Asset Allocation: From 95% to 100% in Reliance ETF and the rest of 5% in other Reliance Mutual Fund based liquid schemes as well as other money market instruments.

Load: There will be no entry load during NFO or even after it opens for public, but there is an exit load of 2% if switched or redeemed within 1 year of investment and this applies for the SIP option as well.

Price per Unit: During NFO the unit price will be Rs. 10 per unit and subsequently at the prevailing rates when it opens after February 28, 2011.

For investing in Reliance Gold Fund you don’t need any demat account or trading account to buy or sell instead you can just buy it just like any other MF schemes and give the ECS option for the SIP and see your portfolio grow with buying gold in small amounts each month.

Benefits of Gold via SIP:

Reliance Gold Savings Fund is an excellent scheme considering it gives us the best option to invest in gold via the Systematic Investment Plan (SIP) route which no other fund or ETFs offers us and investing in gold proves to be beneficial in long term as it is the perfect hedge against the inflation and rather than buying gold in bulk all at once, SIP can prove to be even beneficial in terms of returns, for sure.   Since you can sell these units within a day or two and hence the liquidity part is also taken care of if you chose to invest in Reliance Gold Fund!  It looks like a win-win situation for all of those looking to buy gold in installments!

If you are planning to diversify your portfolio and looking to add gold in it, I would definitely suggest you to go for the Reliance Gold Savings Fund via SIP, but read the offer document before actually buying them for better understanding of how it works and its returns.  And since it is opening NFO is on February 14, 2011, it can prove to be an ideal Valentine’s Day gift!  Meanwhile, more updates to follow.

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NFO is open from January 17, 2011 and closes on January 31, 2011.

Key Benefits:

Fidelity India Children’s Plan provides you with the opportunity to invest for your child’s need via three different funds for three different goals and hence you can keep on invested until that is reached.  You have the option of either choosing lump sum or systematic investment option for your specific needs.

Fidelity India Children’s Plan – Education Fund:

This education fund comes with long term return potential with 70% of its investment in equities and 30% in debt.  This is ideal for those looking for lumpsum returns during their children’s key years of education, i.e., during graduation where you might need to shell up significant amount for the same.

Fidelity India Children’s Plan – Marriage Fund

This as the name of the fund suggests is ideal for those looking for long term savings for their kid’s marriage in the future.  This fund primarily invests 70% in equities, 10% in debt and the balance 20% in gold ETFs and hence the gold part involved in any marriage is fulfilled by this fund.  Also acts as a hedge against gold price rise in the future.

Fidelity India Children’s Plan – Savings Fund

This is primarily a debt fund with upto 100% asset allocation in debt and money market instruments.  This is ideal for those who are very much averse of investing in equities and does not want to take any risk in terms of investments or savings.  This provides the wholesome stability to your portfolio.

Benchmark Index

Education Fund: 70% BSE 200 Index, 30% CRISIL Short Term Bond Fund Index

Marriage Fund: 70% BSE 200 Index, 20% Gold Prices, 10% CRISIL Short Term Bond Fund Index

Savings Fund: CRISIL Short Term Bond Fund Index

Options Available:  Growth and Dividend (payout and reinvestment) options available in all the three funds mentioned above.

Minimum Investment:  Rs. 5000 and in multiples of Rs. 500 thereafter.  The SIP (Systematic Investment Plan) and Systematic Transfer Plan (STP) options are available for all the 3 funds mentioned above.  There will be no charges or penalties for switch between the above 3 funds but there are exit loads for switches and withdrawals made within one year of investment.

This seems like a pretty good portfolio option for those looking for specific goals like children’s education, marriage, etc., as you know the exact goal that you are investing for and knows when to exit or transfer systematically when the goal nears.  But the only glitch here is that this fund Fidelity India Children’s Plan being an NFO, hence investing in it via SIP can prove to be a better option than investing a lump sum amount considering the market fluctuation we are witnessing these days!  You can invest in this fund online or download the form and submit the same to your nearest Fidelity AMC centre or contact your investment advisor for the same.  You can even wait for it until they reopen for regular investments and start your SIP then for slightly better results.

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