How Are Mutual Funds Classified Based On Their Portfolios?

1.	How Are Mutual Funds Classified Based On Their Portfolios?
Answer» Growth Funds Investment objective: Capital appreciation of equity shares Investment avenue: Equity shares of companies with high growth potential For eg. Morgan Stanley Growth Fund Income Funds Investment objective: Providing safety of investments and regular income Investment avenue: Bonds, debentures and other debt related instruments as well as equity shares of companies with high dividend payouts. There are 2 aspects of income funds viz. low investment risk with constant income and high investment risk generating high income. For eg. Templeton Income Fund Balanced Funds Investment objective: Modest risk of investment and reasonable rate of return Investment avenue: Judicious mix of equity shares, preference shares as well as bonds, debentures and other debt related instruments. For eg. GIC Balanced Fund Money Market Mutual Funds (MMMFs) Investment objective: To take advantage of the volatility in interest rates in the money market Investment Avenue: Certificate of deposits (CDs), call money market, commercial papers. Investors can participate INDIRECTLY in the money market through MMMFs. For eg. IDBI-PRINCIPAL Money Market Fund 1997 Specialised Funds Investment Objective: To take advantage of CONDITIONS in a particular sector or a specific income PRODUCING security Investment Avenue: Specialised investments in securities of companies in certain sectors or specific income producing securities For eg. Kothari Pioneer's Internet Opportunities Fund Leveraged Funds Investment objective: To increase the value of the portfolio and benefit the shareholders by gains exceeding the cost of borrowed funds Investment avenue: SPECULATIVE and risky investments, like short sales to take advantage of DECLINING market. Not common in India Index Funds Investment Objective: To increase the value of the portfolio in line with the benchmark index (for eg. BSE Sensex, SP CNX 50) Investment Avenue: Investments only in those shares that form a part of the benchmark index, in exactly the same proportion, so that the value of the index fund varies in proportion with the benchmark index. For e.g. UTI Nifty Index Fund Hedge Funds Investment Objective: To hedge risks in order to increase the value of the portfolio Investment Avenue: Employ speculative trading principles - buy rising shares and sell shares whose prices are likely to fall.Not common in India Growth Funds Investment objective: Capital appreciation of equity shares Investment avenue: Equity shares of companies with high growth potential For eg. Morgan Stanley Growth Fund Income Funds Investment objective: Providing safety of investments and regular income Investment avenue: Bonds, debentures and other debt related instruments as well as equity shares of companies with high dividend payouts. There are 2 aspects of income funds viz. low investment risk with constant income and high investment risk generating high income. For eg. Templeton Income Fund Balanced Funds Investment objective: Modest risk of investment and reasonable rate of return Investment avenue: Judicious mix of equity shares, preference shares as well as bonds, debentures and other debt related instruments. For eg. GIC Balanced Fund Money Market Mutual Funds (MMMFs) Investment objective: To take advantage of the volatility in interest rates in the money market Investment Avenue: Certificate of deposits (CDs), call money market, commercial papers. Investors can participate indirectly in the money market through MMMFs. For eg. IDBI-PRINCIPAL Money Market Fund 1997 Specialised Funds Investment Objective: To take advantage of conditions in a particular sector or a specific income producing security Investment Avenue: Specialised investments in securities of companies in certain sectors or specific income producing securities For eg. Kothari Pioneer's Internet Opportunities Fund Leveraged Funds Investment objective: To increase the value of the portfolio and benefit the shareholders by gains exceeding the cost of borrowed funds Investment avenue: Speculative and risky investments, like short sales to take advantage of declining market. Not common in India Index Funds Investment Objective: To increase the value of the portfolio in line with the benchmark index (for eg. BSE Sensex, SP CNX 50) Investment Avenue: Investments only in those shares that form a part of the benchmark index, in exactly the same proportion, so that the value of the index fund varies in proportion with the benchmark index. For e.g. UTI Nifty Index Fund Hedge Funds Investment Objective: To hedge risks in order to increase the value of the portfolio Investment Avenue: Employ speculative trading principles - buy rising shares and sell shares whose prices are likely to fall.Not common in India

Answer»

Growth Funds

Investment objective: Capital appreciation of equity shares

Investment avenue: Equity shares of companies with high growth potential

For eg. Morgan Stanley Growth Fund

Income Funds

Investment objective: Providing safety of investments and regular income

Investment avenue: Bonds, debentures and other debt related instruments as well as equity shares of companies with high dividend payouts. There are 2 aspects of income funds viz. low investment risk with constant income and high investment risk generating high income.

For eg. Templeton Income Fund

Balanced Funds

Investment objective: Modest risk of investment and reasonable rate of return

Investment avenue: Judicious mix of equity shares, preference shares as well as bonds, debentures and other debt related instruments.

For eg. GIC Balanced Fund

Money Market Mutual Funds (MMMFs)

Investment objective: To take advantage of the volatility in interest rates in the money market

Investment Avenue: Certificate of deposits (CDs), call money market, commercial papers. Investors can participate INDIRECTLY in the money market through MMMFs.

For eg. IDBI-PRINCIPAL Money Market Fund 1997

Specialised Funds

Investment Objective: To take advantage of CONDITIONS in a particular sector or a specific income PRODUCING security

Investment Avenue: Specialised investments in securities of companies in certain sectors or specific income producing securities

For eg. Kothari Pioneer's Internet Opportunities Fund

Leveraged Funds

Investment objective: To increase the value of the portfolio and benefit the shareholders by gains exceeding the cost of borrowed funds

Investment avenue: SPECULATIVE and risky investments, like short sales to take advantage of DECLINING market. Not common in India

Index Funds

Investment Objective: To increase the value of the portfolio in line with the benchmark index (for eg. BSE Sensex, SP CNX 50)

Investment Avenue: Investments only in those shares that form a part of the benchmark index, in exactly the same proportion, so that the value of the index fund varies in proportion with the benchmark index.

For e.g. UTI Nifty Index Fund

Hedge Funds

Investment Objective: To hedge risks in order to increase the value of the portfolio

Investment Avenue: Employ speculative trading principles - buy rising shares and sell shares whose prices are likely to fall.Not common in India