ELSS Funds : give you a dual benefit. It helps in providing capital appreciation and tax savings. These funds have a lock period of 3 years. There is no limit to invest under such category of fund. However, you will get the tax benefit up to an investment of Rs 1.5 lakh under section 80C of I-T Act.
Liquid Funds : Money is invested in securities which have a maturity of up to 91 days. Assets which are invested in this category are not held for a long time as liquid funds do not have a lock-in period. Therefore, they can be redeemed whenever you are in need of money. Returns are not guaranteed as the performance of fund depends upon the market volatility.
Diversified Funds : contain a wide variety of sectors so as to reduce the amount of risk in the fund. Actively managing the diversification helps in preventing the events that can affect one sector from affecting an entire portfolio of an investor. Investing in the schemes offered by diversified funds reduces heavy losses if market conditions go wrong.
Balanced Funds : A balanced fund is a fund which combines debt and equity stocks. Equity oriented hybrid funds invest in 65% Equity and 35% Debt / Fixed Income. These funds are beneficial for first timers investing in a mutual fund.
Large cap Funds : comprise of blue-chips companies which are having large market capitalization. However, there are no such criteria of being a large cap because it varies from company to company considering their huge market capitalization. This fund provides stability and sustainability with lower returns as compared with diversified funds and small / mid cap funds under normal growth conditions.
Flexi cap Funds : are a type of diversified equity funds where a fund manager can invest in equity stocks across market capitalisations : large cap, mid cap, and small cap stocks. Flexi simply means that if a stock from a given segment is not performing, then the fund manager can alter his strategy.
Mid / Small cap Funds : are risky in nature but they provide exceptionally high returns because these funds comprises of sectors which are from small and emerging companies. Generally, these companies have low market capitalization. Someone who is very aggressive in taking risk can make investment into such category of funds. These funds offers highest returns under normal conditions as compared to other categories of funds. They are a good option to generate money for your long term goals.