Decoding different mutual fund categories

Sebi has classified funds to ensure investors understand where their money is being invested and risks involved

- DIPAK MONDAL @New Delhi

START a systematic investment plan (SIP) in mutual funds — this is a popular refrain among investment advisors. They may suggest different categories of funds to build your mutual fund portfolio, and many of the names — flexi-cap, multi-cap, value fund, growth fund — might sound Greek to you.

Here’s a simple guide to decode some of those terms so that the next time a financial advisor throws such jargon at you, you don’t feel clueless. (This explanation covers only equity fund categories.)

Large-cap funds: These funds, as per Sebi’s definition, must invest at least 80% of their portfolio in large-cap stocks — the stocks of the top 100 companies by market capitalisation.