India offers hundreds of schemes, which can make choosing among mutual fund plans confusing. The good news is that mutual fund plans can be grouped in a simple way, and once you understand the groups, selecting the right plan becomes easier. This guide from SMC Global Securities explains the main mutual fund plans by category, option, plan type and investment mode, so you can match mutual fund plans to your goals.
What Are Mutual Fund Plans?
Mutual fund plans are investment schemes that collect money from many investors and invest it in stocks, bonds or other assets through a professional fund manager. Each of the mutual funds plans has a stated objective, risk level and cost. SEBI has standardised scheme categories so that investors can compare mutual fund plans more easily.
Mutual Funds Plans by Category
1. Equity mutual fund plans: These invest mainly in shares and aim for long-term growth. Examples include large-cap, mid-cap, small-cap, flexi-cap, multi-cap, sectoral and thematic funds. They carry higher risk but also higher return potential over five years or more.
2. Debt mutual fund plans: These invest in government securities, corporate bonds and money market instruments. Liquid, short-duration, corporate bond and gilt funds are common examples. They suit investors seeking relative stability.
3. Hybrid mutual fund plans: These mix equity and debt. Balanced advantage, aggressive hybrid and conservative hybrid funds help diversify in a single scheme.
4. Solution-oriented mutual fund plans: These include retirement and children's funds with a lock-in of five years or until the specified age or goal.
5. Other schemes: Index funds and fund of funds fall here. Index funds simply track a benchmark such as the Nifty 50 at low cost.
Tax-Saving ELSS Funds
Equity Linked Savings Schemes (ELSS) are among the popular mutual fund plans for tax saving. They carry a three-year lock-in, the shortest among Section 80C options, and offer deductions up to ₹1.5 lakh under the old tax regime. They invest mostly in equities, so market risk applies.
Mutual Funds Plans by Option and Plan Type
Mutual funds offer different plans based on how investors want to receive returns and how they purchase units. Understanding these options can help you choose a plan that aligns with your financial goals and investment preferences.
Growth option: Profits remain invested and compound over time.
IDCW option: Income Distribution cum Capital Withdrawal pays out part of the gains periodically, and payouts are not guaranteed.
Direct plan: Bought directly from the AMC and carries a lower expense ratio.
Regular plan: Bought through a distributor, with commission included in the cost.
Mutual Funds Plans by Investment Mode
Investors can also choose a mutual fund investment mode based on their income, available funds and cash flow requirements. Each mode offers a different approach to investing or withdrawing money.
SIP (Systematic Investment Plan): Invest a fixed amount monthly, starting from a small sum, and benefit from rupee cost averaging.
Lump sum: Invest a large amount at once, usually when you have surplus funds.
STP (Systematic Transfer Plan): Move money gradually from one scheme to another.
SWP (Systematic Withdrawal Plan): Withdraw a fixed amount at regular intervals, useful for retirees.
How to Choose from Mutual Fund Plans
Choosing the right mutual fund plan requires considering your financial goals, investment duration, risk tolerance and liquidity needs. Compare the available options carefully before investing.
Set your goal: Retirement, a home, education or wealth creation.
Decide your time horizon: Choose equity-oriented mutual fund plans for five years or more, and debt for shorter periods.
Know your risk appetite: Check the SEBI riskometer.
Compare costs: Look at the expense ratio and exit load.
Review regularly: Rebalance annually.
Mutual Funds Plans vs Direct Derivatives Trading
Some investors combine mutual fund plans with direct market trading. If you trade futures and options, you should understand the FNO ban list. The FNO ban list is a daily list published by NSE of stocks whose open interest has crossed 95% of the market-wide position limit. While a stock is on the FNO ban list, fresh positions are not allowed, and traders may only reduce existing positions. A stock leaves the FNO ban list once open interest falls below 80%.
Breaking these rules can attract penalties. This is a good reminder that trading demands daily monitoring, including a check of the FNO ban list, whereas mutual fund plans are managed by professionals.
Common Mistakes with Mutual Fund Plans
Chasing last year's top performer.
Investing without a goal.
Ignoring costs and taxes.
Stopping SIPs during market falls.
Holding too many overlapping mutual fund plans.
Explore Mutual Fund Plans with SMC Global Securities
SMC Global Securities is a New Delhi-based financial services company and an AMFI-registered mutual fund distributor. Our team helps you compare mutual fund plans across fund houses, start a SIP and track your portfolio. Visit the SMC Global Securities mutual funds page to explore suitable mutual fund plans. If you also trade, keep the FNO ban list in view and keep your core savings in diversified mutual fund plans.
In Conclusion, the right mutual fund plans depend on your goals, horizon and risk comfort. Understand categories, options and modes, then pick simple, low-cost mutual fund plans and stay invested with discipline.
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