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SEBI has defined the mutual fund categories every fund house must work within. Here is what each one is, and what the risk actually looks like — because the category name tells you far less than the riskometer does.
Before you read on — this page describes categories, not recommendations. Nothing here is an offer, a solicitation or a suggestion that any category is suitable for you. Suitability depends on your goal, your horizon and how much volatility you can hold without selling. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully before investing.
Invest predominantly in listed shares. Categories include large cap, large & mid cap, mid cap, small cap, flexi cap, multi cap, focused, value, contra, dividend yield, sectoral and thematic.
Risk: Very High risk on the SEBI riskometer for most categories. Suited to horizons of seven years or more. Short-term falls of 30% or more have occurred historically and can occur again.
Invest in fixed-income securities. Categories include overnight, liquid, ultra short, low duration, money market, short, medium, long duration, corporate bond, banking & PSU, credit risk, gilt and dynamic bond.
Risk: Low to Moderately High risk depending on category. Debt funds are not fixed deposits — they carry interest-rate risk and, in some categories, credit risk. Returns are not assured.
Hold a mix of equity and debt. Categories include conservative hybrid, balanced hybrid, aggressive hybrid, dynamic asset allocation or balanced advantage, multi asset allocation, arbitrage and equity savings.
Risk: Moderate to Very High risk depending on the equity component. The mix does not eliminate market risk, and asset-allocation models can be wrong in both directions.
Track a stated index rather than attempting to beat it. Includes broad-market index funds, sectoral indices, international indices, gold and silver ETFs, and target-maturity debt index funds.
Risk: Risk mirrors the underlying index. Tracking error and, for ETFs, market-price deviation from NAV are additional considerations. Lower cost does not mean lower risk.
Equity schemes qualifying for deduction under Section 80C, subject to the ₹1.5 lakh overall limit and available only under the old tax regime.
Risk: Very High risk. Each instalment carries a statutory three-year lock-in during which redemption is not permitted. Tax benefits depend on your individual circumstances and on tax law as it stands.
Retirement funds and children's funds with a mandated lock-in of five years or until retirement age or majority, whichever is earlier.
Risk: Moderate to Very High risk depending on the underlying allocation. The lock-in is a genuine constraint — money is not accessible in an emergency.
How to read a scheme
Before any scheme goes into a portfolio, these are the questions we work through — and the ones you are entitled to ask us.
Every scheme carries a SEBI-mandated risk label, updated monthly. It is on the front page of the scheme document and it is the single most useful thing on it.
What the scheme is actually allowed to buy, and in what proportion. A scheme that drifts from its stated mandate is a different investment from the one you chose.
Expense ratio, exit load and, for debt, the yield-to-maturity net of costs. Small differences compound into large ones over a decade.
Not the best year. Look at the deepest drawdown the scheme has been through and ask yourself honestly whether you would have held on.
Every scheme has three statutory documents you are entitled to read before investing: the Scheme Information Document (SID), the Statement of Additional Information (SAI) and the Key Information Memorandum (KIM). They set out the investment objective, the asset allocation limits, the risk factors, the fees and the exit load. They prevail over anything said on this website or by us.
You can find them on each Asset Management Company's website, on the SEBI filings page, or we will send you the relevant one on request. Please ask — it takes us a minute and it is the document that actually governs your investment.
Begin the conversation
Categories are easy to list and hard to choose between. Tell us the goal and the horizon and we will explain which ones are even in scope.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully before investing. Past performance is not indicative of future returns, and there is no assurance of capital protection or guaranteed returns.
Credible Investments is the trade name of Amit Agrawal (ARN-119490) and Meenakshi Agrawal (ARN-119982), AMFI Registered Mutual Fund Distributors. We distribute regular plans of mutual fund schemes and receive commission from Asset Management Companies for doing so. We are distributors, not investment advisers, and nothing on this website is investment advice, research or a recommendation to buy or sell.
Registration granted by SEBI and certification from NISM/AMFI in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
