Mutual Fund and its basic, Risk and reward ratio and average return on particular mutual fund category

Greeting to all,

        Here i am going to explain you in basic what is mutau fund and its risk and reward ratio, with average return, the details are gather on the basis of my own experience and  due to this Covid effect it may vary, but in general scenario we can expect returns mentioned in table. 

The main question asked to investor will be, on which basis fund will be selected;

1.       Risk taking Capacity

2.       Objective of Investment

3.       Time frame of Investment

4.       Liquidity requirement

Sr No.	Scheme	Avg. return or Risk reward	Duration	Safety of Fund	Remark
1.	Liquid fund	5 to 6 % PA	Can be for 1 day also.	Highly Safe, investment in Fixed income fund.	Can used against traditional for of Saving bank
2.	Debt fund	8 to 9 % PA	Can be for longer period may be say for 1 or 6 month or for 1 year	Highly Safe, investment in Fixed income fund.	Can used against traditional for of Fixed Deposit
3.	Arbitrage fund	5 to 6 % PA	Normally investment is purchased in NSE and sold in BSE to gain fractional profit.	Highly safe.	Full investment is done in Equity fund but is totally safe only fractional profit is enjoyed.
4.	Equity saving fund	7 to 8 % PA may vary	Normally for 1 year	Very less risky	Normally a fund is invested in debt fund but smaller part of fund say 30 or 35% is invested in equity fund & in arbitrage fund.
5.	Balance Advantage fund	7 to 8 %  PA may vary	Normally for 1 year	Very less risky
6.	Balanced Fund	7 to 8 %  PA may vary	Normally for 1 year	Very less risky
7.	Large Cap Fund	Normally 8 to 10 % PA	Normally for 1 year	Less Risky	Normally this money is invested in Large cap companies
8.	Large & Mid Cap Fund	Normally   8 to 10 % PA	Normally for 1 year or more	Moderately Risky	Normally this money is invested in Large cap & Mid Cap companies
9.	Multi Cap Fund	Normally 8 to 12 % PA	Normally for 1 year or more	Risk Diversified	Money is invested in all the category of fund
10.	Mid Cap Fund	Normally 10 to 15 % PA	Normally for 3 year or more	Riskier but returnable	Investment Done in Mid Cap companies
11.	Small Cap Fund	Normally 12 to 15 % PA	Normally for 5 year or more	Riskier but returnable	Investment Done in Small Cap companies
12.	Sectorial Fund	Normally 10 to 15 % PA	Normally for 5 year or more	Riskier but returnable	Fund house decide the sector on the basis of trend

 

 

Disclaimer : please don't take this as the decision for investment consult your adviser for investment, this  chart will help you to understand the risk to reward ratio and other aspect for your investment planning.

Notes:

1. In Above tables the funds are allocated on the basis from lowest riskier to highly riskier.

 2. The more the risk more the reward.

 3. If we want to invest for more than 10 years than we should go for Small cap fund or Sectorial fund.

 4. The tax ability of fund is in case of;

a. Debt fund it’s tax-free after 3 years and indexation benefit will be available @ 20% taxation & if dividend payout option selected will be tax free.

b. In case of Equity fund it’s taxable as short term if sold before 1 year @ 15% & sold after 1 year will be sold after taxable @ 10%.

I hope this information will be useful for your investment decision, please do take the advise of investment adviser before taking any decision.

Stay safe & stay happy