Categories of Mutual funds
SECP, the Regulator, has categorized the Schemes of mutual funds as under:-Equity Scheme:
An equity scheme or equity fund is a fund that invests in Equities more commonly known as stocks. The objective of an equity fund is long-term growth through capital appreciation, although dividends and capital gain realized are also sources of revenue.Balanced Scheme:
These funds provide investors with a single mutual fund that invests in both stocks and debt instruments. This diversification is aimed at providing investors a balance of both growth through investment in stocks as well as income from investments in debt instruments.Asset Allocation Fund:
These funds may invest their assets in any type of securities at any time in order to diversify their assets across multiple types of securities & investment styles available in the market.Fund of Fund Scheme:
Fund of Funds are those funds, which invest in other mutual funds. These funds operate a diverse portfolio of equity, balanced, fixed income and money market funds (both open and closed ended).Shariah Compliant (Islamic) Scheme:
Islamic funds are those funds which invest in Shariah Compliant securities i.e. shares, Sukuk, Ijara sukuks etc. as may be approved by the Shariah Advisor of such funds. These funds can be offered under the same categories as those of conventional funds.Capital Protected Scheme:
In this type of scheme, the payment of original investment is guaranteed with any further capital gain which may accrue at the end of the contractual term of the Fund. Such funds are for a specific period.Index Tracker Scheme:
Index funds invest in securities to mirror a market index, such as the KSE 100. An index fund buys and sells securities in a manner that mirrors the composition of the selected index. The fund's performance tracks the underlying index's performance.Money Market Scheme:
Money Market Funds are among the safest and most stable of all the different types of mutual funds. These funds invest in short term debt instruments such as Treasury bills and bank deposits.Income Scheme:
These funds focus on providing investors with a steady stream of fixed income. They invest in short term and long term debt instruments like TFCs, government securities like T-bills/ PIBs, or preference shares.Aggressive Fixed Income Scheme:
The aim of aggressive income fund is to generate a high return by investing in fixed income securities while taking exposure in medium to lower quality of assets also.Commodity Scheme:
These schemes enable small investors to take advantage of gains in commodities, such as gold, through pooled investments. They invest at least 70% of their assets in commodity futures contracts, which include both cash-settled and deliverable contracts.
An investor can invest in any of the above categories of funds in accordance with his requirements and appetite for risk. For example, those who want to earn high returns over a longer period can invest in Equity Funds, whereas those who want to invest for short term with reasonable return can invest in Money Market Fund.