Income fund: as the name suggests, this fund aims to generate and distribute income to the members (unit holders) on regular basis. This fund concentrates on distribution of income (regular income) and it also sees that the average return is higher than that of the income from bank deposits.
Pure Growth funds (Growth-oriented funds):unlike the income fund, growth funds concentrate on long term gains – which is capital appreciation. They do not offer regular income distribution. They aim at giving capital appreciation in the long run. Hence they have been described as “Nest Eggs” investment.
Balanced Fund:such a fund is a combination of income and balanced fund. They aim at regular distribution of income to unit holders and also aims to provide capital appreciation. They try to achieve this by balancing their investments between the high growth equity shares on one hand and fixed income earning securities on the other hand.
Specialised funds: such funds offer special schemes so as to meet the specific categories of people like pensioners, widows, etc.. There are also funds for investment of securities in specific areas like – Japan fund, South Korea Fund, etc..In fact, these funds open the door for foreign investors to invest on the domestic securities of these countries.
Sometimes, such funds maybe sector specific (fertilizers, sugar, automobiles, banking, etc.). These funds carry heavy risk as they are invested in one sector only. Any adverse movements in that particular sector and the entire fund value crashes.
Money Market Funds:such funds are open-ended funds and they invest in highly liquid and safe securities like commercial paper, banker’s acceptances, certificates of deposits, treasury bills, etc. – these instruments are called money market instruments.
Taxation fund: A taxation fund is basically a growth-oriented fund. But, it offers tax rebates to the investors either in the domestic or foreign capital market it is suitable to salaried people who want to enjoy tax rebates particularly during the month of February and March (year-end).