In India, apart from the standard types of mutual funds like equity, debt, hybrid, index funds, sector funds, and tax-saving funds (ELSS), there are several special types of mutual funds designed to cater to specific needs or preferences of investors.
1. Exchange-Traded Funds (ETFs):
- ETFs are mutual funds that trade on stock exchanges like individual stocks. They typically replicate the performance of a specific index, commodity, or basket of assets.
- Example: Nifty BeES (based on Nifty 50 index), Gold ETFs, etc.
2. Fund of Funds (FoF):
- Fund of Funds invest in other mutual funds rather than directly in stocks or bonds. They offer diversification across multiple funds managed by different asset management companies.
- Example: ICICI Prudential US Bluechip Equity Fund of Fund.
3. Liquid Funds:
- Liquid funds invest in short-term money market instruments like treasury bills, commercial papers, and certificates of deposit, offering high liquidity and low risk.
- Example: HDFC Liquid Fund, SBI Liquid Fund.
4. Index Funds:
- Index funds mirror a specific stock market index (like Nifty 50 or Sensex) and aim to replicate its performance.
- Example: UTI Nifty Index Fund, HDFC Index Fund - Sensex Plan.
5. Gold Funds:
- These funds invest in physical gold or gold-related instruments, providing exposure to the precious metal without holding physical gold.
- Example: SBI Gold Fund, Axis Gold Fund.
6. Sectoral Funds:
- Sectoral funds focus on specific sectors of the economy such as technology, healthcare, banking, etc., allowing investors to bet on the growth prospects of particular industries.
- Example: Aditya Birla Sun Life Digital India Fund (Technology sector).
7. International Funds:
- These funds invest in overseas markets, providing Indian investors exposure to global equities or bonds.
- Example: Franklin India Feeder - Franklin U.S. Opportunities Fund.
8. Balanced Advantage Funds:
- Also known as dynamic asset allocation funds, these funds dynamically adjust their equity and debt allocations based on market conditions and valuations.
- Example: ICICI Prudential Balanced Advantage Fund, HDFC Balanced Advantage Fund.
9. Arbitrage Funds:
- Arbitrage funds aim to profit from price differentials in the cash and derivatives markets by simultaneously buying and selling securities, thus generating low-risk returns.
Example: Kotak Equity Arbitrage Fund, Edelweiss Arbitrage Fund.
10. Focused Funds:
- Focused funds invest in a limited number of stocks (typically 30-50), focusing on high conviction picks to achieve potentially higher returns.
Example: Axis Focused 25 Fund, SBI Focused Equity Fund.
These special types of mutual funds in India cater to different investment objectives, risk profiles, and preferences of investors, providing them with diverse options to build a well-rounded investment portfolio. It's important for investors to carefully assess their financial goals and risk tolerance before investing in any mutual fund.