Freemindscafe

Mutual funds cheat sheet for a software engineer

#1

There are broadly three types of mutual funds.

  • Liquid funds
  • Debt funds
  • Equity funds

Liquid funds don’t have any entry and exit load. Their AMC (Annual Maintenance Charges) is less than 0.3%. These fall in very low risk and very low reward category.

Debt funds might have some entry and exit load. Their AMC is less than 1 %. These fall in low risk and low reward category.

Equity funds will have some entry and exit load. Their AMC is close to 1.5%. These fall in hight risk and high reward category. These can further be subdivided into three sub categories.

  • Micro cap funds (Investment is made in very small companies)
  • Mid cap funds (Investment is made in mid size companies)
  • Large cap funds (Investment is made in large size companies)

Funds Allocation

  • Exposure to equity funds at any stage should not exceed more than 80 minus your current age.
  • Out of that exposure10% can be put into micro cap funds.
  • 10% can be put into mid cap funds.
  • Rest should be with large cap funds.

Funds Selection
As per my understanding the following funds selection should be made in a given scenario.

I have some emergency fund where to keep that money Liquid fund
I save some money monthly for my kids school fees Liquid fund
I save some money every month for any travel or unexpected expense Liquid fund
I save some money for my kids higher education Debt + Equity fund
I save some money for my retirement Debt + Equity fund