A fund meant for a long-term timeframe should not be used for short-term investment horizons. Do note that a shorter-term debt fund can be held beyond the recommended minimum timeframe. The list is split based on approximate minimum holding period required. Timing is crucial and can be done only by well-informed investorsĪll debt funds have the same taxation on capital gains and dividends. Very high risk as sectors and themes have only specific periods where they perform. Invests along a particular sector or theme with 80% of portfolio in such sectors/ themes Limit mid-cap allocation (along with small-cap allocation) to 30% of 5-7 and above portfolios. These funds can be used by moderate and high-risk investors. Very high risk as small-caps are volatile and several stocks can be illiquid. Needs to invest at least 65% in small-cap stocks Can be used by moderate and high-risk investors. Needs to invest at least 65% in mid-cap stocks Suits any investor looking to make tax-saving investments. Each investment is locked in for 3 years. Qualifies for deductions under section 80C of the Income Tax Act. Needs to invest at least 80% of portfolio in equity Can be used by high-risk and moderate-risk investors with a long timeframe High risk as concentrated holding in a few stocks can lead to volatility. High risk as value as a strategy can underperform for a long time before markets notice potential in under-valued stock picks. Can be used for long-term portfoliosįollows a value-based investment strategy, picking stocks trading below intrinsic valuations Despite the name, these funds do not need to pay dividends. Risk depends on nature of market-cap allocation. Predominantly invests in dividend paying stocks. If large-cap exposure is steadily higher, can be used by conservative investors as well Can be used by moderate and aggressive investors for long-term portfolios. Risk depends on the dynamism in market-cap allocations and the large-cap exposure. Needs to invest a minimum of 35% each in large-cap and mid-cap stocks Suitable as part of long-term portfolios for any investor Suitable as part of any 5+ year portfolios for any investorĬan invest across larege-cap, mid-cap, and small-cap stocks Holds the lowest risk among equity fund categories. Needs to invest at least 80% of portfolio in large-cap stocks Suits investors who want to hold a particular index without taking the risk of a fund manager’s active calls Tracks a particular stock market or bond market index. Ensure that you have at least 20% of your portfolio invested in debt funds or other fixed-income instruments. Do note that equity funds in general require a minimum of 5 years and that an entire portfolio should not be invested only in equity. The categories are listed according to the risk level involved, moving from moderate risk to high risk in different shades. Mutual fund categories – Equity fundsĪll equity funds have the same taxation on capital gains and dividends. In order to bring in uniformity and facilitate easier comprehension for investors, SEBI has designed categories for mutual fund schemes, along with broad guidelines for each. There is no dearth to the number of schemes that each mutual fund comes out with.