Following different mutual fund types

As we have explained to you, various fund schemes with different investment objectives can be floated by an AMC (Asset Management Company). AMC performs marketing, accounting and other associated tasks pertaining to the fund.

When you purchase the units of a fund, you pay a certain percentage of it as a fee, called the entry load. When you sell the units of a fund, you pay a certain percentage of it as a fee, called the exit load. As is the practice, only one of the loads – entry or exit - is charged.

There are different fund schemes as explained below.

A diversified equity mutual fund invests in stocks of various listed companies across sectors like IT, infrastructure, power, etc. A balanced fund invests in both equity (shares) as well as debt (fixed return investments) instruments.

Debt funds invest invariably in fixed return investments such as bonds. A liquid fund invests mostly in money market instruments; they work as fixed return investments over a very short period of time.

Equity Linked Saving Schemes (ELSS) are qualified as diversified equity mutual fund plans that offer a tax exemption under Section 80C of the IT Act. Your money invested is locked for at least three years to avail of the tax benefit.