Sector Funds

Sector Funds are the riskiest among equity funds. Barring a few defensive, evergreen sectors, like FNCG and pharma, most other industries alternate between periods of strong growth and bouts of slowdowns. The way to make money from sector funds is to catch these cycles-get in when the sector is poised for an upswing and exit before it slips back. Therefore, unless you understand a sector well enough to make such calls, and get them right, avoid sector funds.

What are debt funds?

Such funds invest only in debt instruments, and are a good option for investors averse to taking on the risk associated with equities. Here too, there are specialized schemes, namely liquid funds and gift funds. While the former invest predominantly in money market instruments, gift funds do so in securities issued by the central and state governments.

Tax-Saving Funds

Also known as ELSS or equity-linked savings schemes, these funds offer benefits under Section 88 of the Income-Tax Act. So, on an investment of upto Rs.10,000 a year in an ELSS, you can claim a tax exception of20 percent from your taxable income. You can invest more than Rs.10,000, but you can invest more than Rs.10,000, but you won’t get the Section 88 benefits for the amount in excess of Rs. 10,000. The only drawback to ELSS is that you are locked into the scheme for three years.

Types of Mutual Fund schemes

Wide variety of Mutual Fund schemes exists to cater to the needs such as financial position, risk tolerance and return expectation etc. the figure below gives an overview into the existing types of schemes in the industry. It can be divided into two categories. One by structure and the other by investment objective.

Hypothetical Example of Mutual Funds

Each fee table ends with an example showing how much of your investment would go to expenses over one, three, five, and ten years. Each fund assumes a $10,000 investment and a 5 percent return each yea and that you sell your shares at the end of the time period. This allows you to compare funds with different fees to determine how much the different fees will cost you.

Total Funds

Total fund Operating Expenses. This is a total of all the fund’s annual costs-the bottom line, so to speak. Other fees to look for include maximum sales charges on reinvested dividends and exchange fees (per transaction), charges for switching from one fund to another in the same family. Good Luck.