With an increase in interest and awareness about mutual funds amongst investors, there has also been a steady increase in the number of mutual fund schemes offered in India by as many as 35 Asset Management Companies (as on December 2006).

Different schemes are introduced to suit different needs of investors. Mutual funds schemes may have different investment objectives which can be to earn recurring income for investors or growth of their invested capital or both. So investors should choose a scheme whose investment objestive matches their personal objectives. To achieve the scheme's investment objectives, the fund manager, as per his own understanding, invests in a portfolio of asset classes which he thinks may provide the best returns to investors in the future. Different assets are exposed to a different level of risk. For example, investing in equities is riskier than investing in debt and investing in debt is slightly riskier than investing in money-market instruments. However, riskier investment options have a higher potential to provide higher returns.


Mutual Fund Schemes Comparison
Below is a comparison between different mutual fund schemes on the basis of their investment objectives, portfolio of investments and the level of risk associated.

Equity Funds
Types	Investment Objectives	Portfolio of Investments	Risk Associated
Aggressive Growth Funds	Capital Appreciation	Invest in less researched shares of speculative nature	Highly Volatile
Growth Funds	Capital Appreciation	Invest in companies that are expected to outperform the market in the future	Volatile but less than Aggressive growth funds
Specialty Funds	Capital Appreciation	They follow a stated criteria for investments and their portfolio comprises of only those companies that meet their criteria.	Concentrated and hence are riskier than diversified funds
Diversified Equity Funds	Capital Appreciation	A small portion of investment in liquid money market, diversified equity funds invest mainly in equities without concentration on a particular sector.	Well diversified and reduce sector-specific or company-specific risk
Equity Index Funds	Capital Appreciation	Portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index.	Risk associated is the same as that of the benchmark index. Broader indices (like S&P CNX Nifty or BSE Sensex) are less risky than narrow indices (like BSEBANKEX or CNX Bank Index)
Value Funds	Capital Appreciation	Value funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued.	These funds are exposed to a lower risk level as compared to growth funds or speciality funds
Equity Income or Dividend Yield Funds	To generate high recurring income and steady capital appreciation	Investments are made in those companies which issue high dividends (such as Power or Utility companies).	These funds are generally exposed to the lowest risk level as compared to other equity funds

Income / Debt Funds and Money Market Funds
Types	Investment Objectives	Portfolio of Investments	Risk Associated
Diversified Debt Funds	To generate fixed current income	These funds invest in all securities issued by entities belonging to all sectors of the market	Low volatility, default risk remains
High Yield Debt funds	To earn higher interest returns	Invest in securities issued by those issuers who are considered to be of "below investment grade"	More volatile and bear higher default risk than diversified debt funds
Assured Return Funds	To offer assurance of annual returns to investors through out the stated lock-in period	Predominantly debt securities	A low-risk investment opportunity
Fixed Term Plan Series	To generate some expected returns in a short period	Usually invest in debt / income schemes	Low risk fund
Money-Market Funds	Recurring income and capital safety	Invest in short-term (maturing within one year) interest bearing debt instruments	Safest mutual fund investment option, interst rate risk remains

Hybrid Funds
Types	Investment Objectives	Portfolio of Investments	Risk Associated
Balanced Funds	To generate regular income, moderate capital appreciation and at the same time minimizing the risk of capital erosion	Debt securities, convertible securities, and equity and preference shares held in a relatively equal proportion	Limited risk to principal and moderate long-term growth
Growth-and-Income Funds	Capital growth and some current income	These funds invest in companies having potential for capital appreciation and those known for issuing high dividends	Safer as compared to growth funds and riskier than income funds
Asset Allocation Funds	Capital Growth and income generation	These funds invest in financial assets or non-financial (physical) assets	Success of these funds depends upon the skills of a fund manager in anticipating market trends