Growth Funds:

Growth Funds are schemes that are designed to provide capital appreciation. Primarily invest in growth-oriented assets, such as equity. Investment in growth-oriented funds requires a medium to the long-term investment horizon. Historically, Equity as an asset class has outperformed most other kinds of investments held over the long term. However, returns from Growth funds tend to be volatile over the short term since the prices of the underlying equity shares may change. Hence investors must be able to take volatility in the returns in the short term.

Income Funds:

The objective of Income Funds is to provide regular and steady income to investors. Income funds invest in fixed-income securities such as Corporate Bonds, Debentures, and Government securities. The fund’s return is from the interest income earned on these investments as well as capital gains from any change in the value of the securities. The fund will distribute the income provided the portfolio generates the required returns. There is no guarantee of income. The returns will depend upon the tenor and credit quality of the securities held.

Liquid/Overnight/Money Market Funds:

Liquid Schemes, Overnight Funds, and Money market mutual funds are investment options for investors seeking liquidity and principal protection, with commensurate returns.

  1. The funds invest in money market instruments* with maturities not exceeding 91 days.
  2. The return from the funds will depend upon the short-term interest rate prevalent in the market.

These are ideal for investors who wish to park their surplus funds for short periods. Investors who use these funds for longer holding periods may be sacrificing better returns possible from products suitable for a longer holding period.

* Money Market Instruments include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity of up to one year, call or notice money, certificate of deposit, usance bills, and any other like instruments as specified by the Reserve Bank of India from time to time.