What are the Various Categories that Mutual Funds are Divided into by SEBI?

There are more than 2500 mutual fund schemes in India right now. These are offered by 44 fund houses. All of these schemes offer regular and direct plans, and you can invest in them via a SIP or in a lump sum. Mutual funds are regulated by the Securities and Exchange Board of India (SEBI). Since there are several types of mutual funds, SEBI has classified them into certain categories. This categorization can help you pick out mutual fund schemes that align with your risk appetite, investment objective (what you’re saving up for), and investment horizon (how long you wish to invest). They also help reduce confusion.

Here’s how SEBI classifies mutual funds:

1. Equity Schemes: These funds invest in equity and equity-related instruments. Equity mutual funds are further categorized into 10 categories. These include:

Small Cap Fund
Mid Cap Fund
Large Cap Fund
Multi-Cap Fund
Large and Mid Cap Fund
Equity Linked Savings Scheme (ELSS)
Value Fund
Contra Fund
Dividend Yield Fund
Sectoral or Thematic Fund
Focused Fund

2. Debt schemes: These funds invest in fixed income instruments such as government securities, Treasury Bills (TBs), Certificates of Deposits (CDs), PSU bonds, etc. Debt mutual funds are further categorized into 16 categories. These include:

Ultra Short Duration Fund
Short Duration Fund
Medium Duration Fund
Medium to Long Duration Fund
Long Duration Fund
Low Duration Fund
Money Market Fund
Liquid Fund
Gilt Fund
Gilt Fund with 10-year Constant Duration
Overnight Fund
Corporate Bond Fund
Banking & PSU Fund
Dynamic Bond Fund
Credit Risk Fund
Floater Fund

3. Hybrid Schemes: These schemes invest in a combination of equity and debt. Hybrid mutual funds are further categorized into six categories. These include:

Conservative Hybrid Fund
Balanced Hybrid Fund
Aggressive Hybrid Fund
Multi-Asset Allocation Fund
Dynamic Asset Allocation or Balanced Advantage Fund
Arbitrage Fund
Equity Savings

4. Solution Oriented Schemes: These schemes focus on specific future goals. Solution-Oriented mutual funds are further categorized into two categories. These include:

Children’s Fund
Retirement Fund

5. Other Schemes: The remaining mutual fund schemes have been classified under the following two categories:

Fund of Funds: overseas and domestic
Index Funds or Exchange Traded Funds (EFTs)

To sum it up

The categorization of mutual funds can help you pick out funds free of confusion and doubt. The categories also help you understand the risk associated with each mutual fund and allow you to build an investment portfolio as per your risk capacity. SEBI’s classification removes all irregularities in the structure of mutual funds and streamlines schemes, making it easier for you to select the right option for your needs.

Now that you know how SEBI categorizes mutual funds, you can select an investment app to easily start investing in the funds of your choice. So, download the Tata Capital Moneyfy app and start your investment journey.