It's important to understand that each mutual fund has different risks and rewards.

In general,
the higher the potential return, the higher the risk of loss. Although some funds are less risky
than others, all funds have some level of risk - it's never possible to diversify away all risk. This
is a fact for all investments.

By Investment Objective
Open-ended schemes
These funds do not have a fixed maturity and one can invest in such funds on any working day, during
business hours. Investors can buy or sell units of open-ended schemes directly from the fund house at
NAV related prices.

Examples –

HDFC Cash Management Fund Savings Plan – 7.89% return annually

ICICI Prudential Sweep Plan-Cash Option – 7.91% returns annually

U.S. mutual funds:

 • T. Rowe Price
• Fidelity Investments' Magellan
• The Vanguard Group's S&P 500
• PIMCO Total Return
• WorldCommodity Fund

Close-ended schemes
Such funds have a fixed maturity period and are open for subscription only for a specified period. After
the expiry of this period, investors can buy or sell the units on the stock exchanges where such funds
are listed. Some funds also have the option of periodic repurchase, whereby investors can sell back
their units to the fund at NAV related prices.

Examples

ICICI Prudential Fusion Fund – Growth 41.44% returns annually

Birla Long Term Adv Fund Growth 28.24% returns annually

Among the biggest, long-running CEFs are:

• Adams Express Company (NYSE:ADX)

• Foreign & Colonial Investment Trust plc (LSE:FRCL)
• Witan Investment Trust plc (LSE:WTAN)
• Tri-Continental Corporation (NYSE:TY)
• Gabelli Equity Trust (NYSE:GAB)
• General American Investors Company, Inc. (NYSE:GAM)

Interval schemes
Interval schemes are a combination of both open and close-ended schemes. Investors can purchase or
redeem their shares from the fund house at pre-determined intervals at NAV related prices

By Structure
Growth schemes \ Equity Schemes
Such funds are aimed at capital appreciation over the medium to long term. Usually, such funds invest
a major portion of the portfolio in equities.

HDFC Capital Builder Fund Growth – 48.53% returns

Kotak MidCap Fund Growth – 38.89% returns annually

Income schemes \ Debt Oriented Scheme\Bond Scheme Funds

their purpose is to provide current income on a steady basis. When referring to mutual funds, the terms
"fixed-income," "bond," and "income" are synonymous.

These schemes invest primarily in fixed income instruments issued by the government, banks, financial
institutions and private companies. The main objective of income schemes is preservation of capital
and to provide fixed income over the medium to long term.

HDFC Income Fund – 05.14% returns annually

Birla Sunlife Income Funds – 11.94% returns annually

Bond/Income Funds
Income funds are named appropriately: These terms denote funds that invest primarily in government
and corporate debt. While fund holdings may appreciate in value, the primary objective of these funds
is to provide a steady cashflow to investors. As such, the audience for these funds consists of
conservative investors and retirees.

Bond funds are likely to pay higher returns than certificates of deposit and money market investments,
but bond funds aren't without risk. Because there are many different types of bonds, bond funds can
vary dramatically depending on where they invest. For example, a fund specializing in high-yield junk
bonds is much more risky than a fund that invests in government securities. Furthermore, nearly all
bond funds are subject to interest rate risk, which means that if rates go up the value of the fund goes
down.

Other Schemes
Tax saving schemes
Such schemes are aimed at offering tax rebates to investors under specific provisions of the Income
Tax Act, 1961. For instance, investors of Equity Linked Savings Schemes (ELSS) and Pension
Schemes are applicable for deduction u/s 88 of the Income Tax Act, 1961.

• These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This
is made possible because the Government offers tax incentives for investment in specified avenues.
For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes. Recent amendments to
the Income Tax Act provide further opportunities to investors to save capital gains by investing in
Mutual Funds. The details of such tax savings are provided in the relevant offer documents.
• Investors seeking tax rebates.

HDFC Tax Saver – Growth – 33.81%

Principal Tax Saving Funds – 43.57%

Tata Tax Saving Funds – 35.49%

Balanced schemes
Such funds have a balanced portfolio and invest in equity and preference shares in addition to fixed
income securities. The aim of such funds is to provide both income and capital appreciation over a
long-term.

The objective of these funds is to provide a balanced mixture of safety, income and capital
appreciation. The strategy of balanced funds is to invest in a combination of fixed income and equities.
A typical balanced fund might have a weighting of 60% equity and 40% fixed income. The weighting
might also be restricted to a specified maximum or minimum for each asset class.

Birla Sunlife – 95 – 38.93% returns annually

HDFC Prudence Fund – 31.62% annually

Money market schemes \ Liquid Schemes
Money market schemes invest in short-term debt instruments, which earn interest and have high
liquidity. Though these are considered to be the safest investment option, such funds are subject to
fluctuations in the rates of interest.

The money market consists of short-term debt instruments, mostly Treasury bills. This is a safe place
to park your money. You won't get great returns, but you won't have to worry about losing your
principal. A typical return is twice the amount you would earn in a regular checking/savings account and
a little less than the average certificate of deposit (CD).

HDFC Liquid Fund – Premium Plus – 7.95% returns annually

ICICI prudential Liquid – inst plus – 8.05 % returns annually

Index schemes
Such funds strive to mirror the performance of specific market indices, such as the BSE SENSEX, CNX
Nifty, etc which are called the base index. Investments in such funds are made in the same stocks as
the base index and in similar proportion.

Sensex – 41.4% returns annually

Nifty – 42.6% returns annually
ICICI Pru Index Fund – 44.1% returns annually

Sector-specific schemes
Such funds invest in a specific industry or sector. The investments could be in a particular industry
(Banking, Pharmaceuticals, Infrastructure, etc) or a group of industries, or various segments (like ‘A’
Group shares).

SBI Magnum COMMA Fund – Growth 49.79%

ICICI Prudential Infrastructure Fund – Growth 64.30%

Exchange-traded funds
Such funds are listed and traded on the stock exchange in a similar manner as stocks. Such funds
invest in a basket of stocks and aim at replicating an index (S&P CNX Nifty, BSE Sensex) or a
particular industry (banking, information technology) or commodity (gold, crude oil, petroleum).

Capital protection funds

These funds are designed to safeguard the capital invested therein, by investing in suitable securities.