This type of mutual fund invests in equity schemes of small capitalisation companies. This fund invests a minimum of 65% in equity and equity-related schemes of small-cap companies. Small-cap companies have a very high growth potential if everything goes right. As growth isn't guaranteed, it carries the highest risk but the highest returns.
ELSS (Equity Linked Savings Scheme):
An Equity Linked Saving Scheme, also known as ELSS, is one of the most preferred tax-saving instruments in the market. Not only do they help investors save on tax, but they also facilitate wealth creation. In addition, they come with a short lock-in period of 3 years. This type of mutual fund is appropriate for salaried individuals. Flexicap Funds:
Flexi-cap funds invest in equity and equity-related financial assets across all market capitalisations – small, mid, and large-cap. Providing both value and growth to investors, these mutual funds are dynamic enough to strike a balance between returns and risk by shifting among them. These funds are not limited to investing in stocks with pre-decided capitalization. The fund is allocated to different capitalizations to mitigate the risks by reducing the volatility of a particular capital market.Sectoral/Thematic Funds:
Thematic funds are inclined towards specific themes or trends, such as sustainability and clean energy, and therefore invest in companies matching the specific theme. Multi-cap Funds:
Multi-cap mutual funds do not concentrate on a single market capitalisation but expand to all capitalisations and sectors. The investment in the fund assets is exposed to large-cap stocks to maintain stability and mid-cap and small-cap to yield growth potential. The underlying stocks can redeem their value in the bull market, where the manager capitalizes on the growth opportunities of both small and medium companies. Similarly, they bend towards large-cap stocks to take refuge when the market gets bearish.Value Funds:
This type of mutual fund adheres to a value investment strategy. They invest in stocks of companies that have 'value' and the potential to grow in the future. These are the companies that have an underrated stock value, and stock value is not a faithful indicator of their worth. A company’s intrinsic value is determined by considering its business model, financials, competitive analysis, and management team, to name a few. If the company’s intrinsic value is more than the market value, it is regarded to have 'value.'