Types of Mutual Funds

Open-ended schemes
Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units on any business day. This provides good liquidity.
Close ended schemes
Schemes that have a fixed maturity period are called close-ended schemes. One can invest in this type of scheme only at the time of initial issue. The initial issue period of the scheme can be one month 2 months or more depending on the scheme. After closing of the initial issue investors cannot invest in the scheme.
Growth Schemes
They Provide capital appreciation over the medium to long term. These schemes normally invest majority of their funds in equities. Growth funds are suitable for investors who can afford to assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income.
These schemes can further be classified into the following
1. Small Cap Fund: - these funds primarily invest in companies which are small in nature. They invest in companies that have started recently. Usually small cap comes under a very high risk category because they invest in companies which have a limited track record.
2. Mid Cap Fund: - These funds primarily invest in companies which are medium in size. These funds carry less risk as compared to small cap funds.
3. Large Cap Fund: - As the name suggest it invests in well established companies.
4. Sectoral Fund: - These funds invest only in one particular sector such as health care, technology, power or infrastructure. For example a Power fund will invest only in companies related to power and not in companies related to textiles or pharmaceuticals. Similarly and infrastructure fund will invest only in companies such as cement, steel, etc which are vital for developing infrastructure.

Balance Schemes
Balance schemes invest in both shares as well as fixed income securities according to the proportion mentioned in the offer documents. These funds are for those who don’t want to put their entire money in equities. Returns as well as risk in these schemes are less as compared to growth schemes. Such funds usually invest a portion in safer instruments such as treasury bills, certificate of deposits etc.

Money Market Funds/Liquid Funds
For the conservative investor, these funds provide a very high stability of principal while seeking a moderate to medium returns. They invest in highly liquid, virtually risk-free, short-term debt securities of agencies of the Indian Government, banks and corporations and Treasury Bills.