1. Large cap funds / blue chip funds - invest in large company stocks, typically from BSE 100 index.

Generally low risk investment with moderate returns. 2. Mid cap / small cap funds - Mid cap & small cap funds are generally considered riskier because smaller companies have higher business risks. At the same time, they can give bigger returns. 3. Sector Funds: These funds are the riskiest amongst equity funds as these invest only in specific sectors or industries. The performance of sector funds depends on the fortunes of specific sectors or industries. This type of funds maximizes returns by investing in the sector, when the sector is expected to boom and gets out before it falls. You should invest in these funds only if you really understand the sector and its trends. 4. Index Funds: These funds track a key stock market index like BSE Sensex or NSE S&P CNX Nifty. It will invest only in those stocks which form the market index, as per the individual stock weightage. The idea is to replicate the performance of the bench marked index. The performance should ideally be better than or at least the same as the concerned index. The exit load of these schemes is usually lower than regular schemes. Debt Schemes: Debt schemes invest mainly in income bearing instruments such as bonds, debentures, government securities and commercial paper. This type of fund basically invests in FD like instruments that pay interest based on various market factors. Its volatility depends on the economy reflected by factors such as the rupee depreciation, fiscal deficit and inflationary pressures. Broadly speaking, the returns from pure debt schemes will be in line with bank FDs. There are short term, medium term and long term debt funds based on the time horizon they cater to. 1. Gilt Funds: This is a sub-type of debt funds, which invests only in government securities and treasury bills. They are generally considered safer than corporate bonds and are more tuned towards long term investments. 2. Monthly Income Plans (MIPs): This is basically a debt scheme which invests a marginal amount of money (10%- 25%) in equity to boost the scheme's return. This fund will give slightly higher return than traditional long term debt scheme. 3. Money Market Funds (MMFs): These are also known as liquid funds. These funds are debt schemes that invest in certificate of deposit (CDs), Interbank call money market, commercial papers and short term securities with a maturity horizon of less than 1 year. The funds objective is to preserve principal while yielding a moderate return. It is a low risk- low return investment which offers instant liquidity. Balanced Schemes / Hybrid Schemes: This scheme invests in both equity shares and in income bearing instruments in such a proportion that balances the portfolio. The aim is to reduce the risk of investing in stocks by having a stake in the debt market as well. It usually gives a reasonable return with a moderate risk exposure. There can be hybrid funds that are more oriented towards equity (6070% in equity) and there can be debt oriented hybrid funds (60-70% in debt).

Types of mutual funds are: Value stocks Stocks from firms with relative low Price to Earning (P/E) Ratio, usually pay good dividends. The investor is looking for income rather than capital gains. Growth stock Stocks from firms with higher low Price to Earning (P/E) Ratio, usually pay small dividends. The investor is looking for capital gains rather than income. Based on company size, large, mid, and small cap Stocks from firms with various asset levels such as over $2 Billion for large; in between $2 and $1 Billion for mid and below $1 Billion for small. Income stock The investor is looking for income which usually come from dividends or interest. These stocks are from firms which pay relative high dividends. This fund may include bonds which pay high dividends. This fund is much like the value stock fund, but accepts a little more risk and is not limited to stocks. Index funds The securities in this fund are the same as in an Index fund such as the Dow Jones Average or Standard and Poor's. The number and ratios or securities are maintained by the fund manager to mimic the Index fund it is following. Enhanced index This is an index fund which has been modified by either adding value or reducing volatility through selective stock-picking. Stock market sector The securities in this fund are chosen from a particular marked sector such as Aerospace, retail, utilities, etc. Defensive stock The securities in this fund are chosen from a stock which usually is not impacted by economic down turns. International Stocks from international firms. Real estate Stocks from firms involved in real estate such as builder, supplier, architects and engineers, financial lenders, etc. Socially responsible This fund would invests according to non-economic guidelines. Funds may make investments based on such issues as environmental responsibility, human rights, or religious views. For example, socially responsible funds may take a proactive stance by selectively investing in environmentally-friendly companies or firms with good employee relations. Therefore the fund would avoid securities from firms who profit from alcohol, tobacco, gambling, pornography etc. Balanced funds The investor may wish to balance his risk between various sectors such as asset size, income or growth. Therefore the fund is a balance between various attributes desired. Tax efficient Aims to minimize tax bills, such as keeping turnover levels low or shying away from companies that provide dividends, which are regular payouts in cash or stock that are taxable in the year that they are received. These funds still shoot for solid returns; they just want less of them showing up on the tax returns. Convertible Bonds or Preferred stock which may be converted into common stock.

Junk bond

Bonds which pay higher that market interest, but carry higher risk for failure and are rated below AAA. Mutual funds of mutual funds This funds that specializes in buying shares in other mutual funds rather than individual securities. Closed end This fund has a fixed number of shares. The value of the shares fluctuates with the market, but fund manager has less influence because the price of the underlining owned securities has greater influence. Exchange traded funds (ETFs) Baskets of securities (stocks or bonds) that track highly recognized indexes. Similar to mutual funds, except that they trade the same way that a stock trades, on a stock exchange