What Are Non-Equity Mutual Funds?

Mutual funds have emerged to be a very popular investment choice among Indian investors over the past years. As more and more people start learning about money management and personal finance, they are investing in mutual funds after realising the growth potential that mutual funds provide. However, there are multiple types of mutual funds that investors can choose from. The most popular forms of mutual funds are equity mutual funds, where fund managers primarily invest the funds into company stocks or equity. The other types of mutual funds are non-equity mutual funds, where fund managers invest in various instruments that are not company stocks or equity. Let’s take a closer look at the types of non-equity mutual funds that Indian investors can invest in.

In this section, we’ll take a closer look at some popular types of non-equity mutual funds and what each of them invests into:

Debt Funds

Debt funds are those types of mutual funds that mainly invest in fixed-income investment instruments such as government bonds, debt securities, treasury bills and other various mutual funds such as Fixed Maturity Plans, Liquid Funds, Gilt Funds, etc. The main purpose of debt funds is to generate steady returns as many such mutual funds offer fixed interest rates along with pre-determined maturity dates. These debt funds are great options for investors who have a low appetite for risk.

Money Market Funds

Similar to how many investors trade stocks, some investors also trade into the money market, which is also known as the cash market. Money market mutual funds invest in various instruments in the money market such as short-term debt instruments, cash, treasury bills, commercial papers, certificates of deposit, etc. The main purpose of money market funds is to earn regular interest and maintain the market value of the fund at very stable levels.

Liquid Mutual Funds

Liquid mutual funds also technically fall under the debt mutual funds category as they primarily invest in debt instruments. However, the tenure of liquid mutual funds is only 91 days. The maximum amount that can be invested under liquid funds is ₹10 lakh. These types of mutual funds are ideal for people who wish to invest in highly liquid securities where they can withdraw their money at a short notice.

Fixed Maturity Funds

As the name suggests, fixed maturity funds are a type of mutual fund that offer fixed maturity periods, ranging from one month to 5 years. Depending on your preference and needs, you can choose to invest in a fixed maturity fund with a tenure of your liking. Fixed maturity funds generally invest into debt, bonds, and the money market, so their risk is relatively much lower than equity mutual funds. Interest earnings are the main purpose of fixed-maturity funds.

Pension Funds

Pension funds are generally long-term mutual funds that allow you to invest money for your retirement. While saving for retirement is necessary, investing those funds for the growth of wealth is equally important. This is where you can choose to invest a portion of your retirement savings into pension funds. While some pension funds do invest in equities and stocks, there are other types of lower-risk pension funds that stay away from investing in equities. You can choose to invest in non-equity pension funds if you are looking for some long-term low-risk investment options. 

Disclaimer: This article does not intend to pass on any financial advice and BQ Prime does not endorse any of the funds/schemes mentioned above. Please invest at your own discretion.