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Yes, there is a special type of mutual fund called Equity Linked Savings Scheme (ELSS) that can help investors save tax under Section 80C of the Income Tax Act, 1961. Investors can claim a deduction of up to Rs. 1.5 Lakh per annum. ELSS usually comes with a lock-in period of 3 years. While it may seem like a long period, ELSS have one of the lowest lock-in periods compared to other tax saving options like PPF (15 years), NPS (till retirement) etc. While a tax saving instrument, investors should remember that ELSS funds are equity-oriented in nature and can be large, mid, or small cap biased.

Mutual funds are a great way to diversify your portfolio. While there are endless subsets of mutual funds, the three core asset classes in mutual funds are equity, debt, and hybrid. Equity funds invest in equity stocks of companies listed on the stock exchange. They carry medium to high risk and range from relatively safer investments like large cap funds to risky investments (mid and small cap funds). Debt funds are comparatively safer as they invest in fixed interest generating investments like fixed deposits, commercial papers, certificates of deposits, treasury bills etc. They are ideal for conservative investors looking to beat inflation without exposing their capital to equity markets. Hybrid funds are a mix of both equity and debt. There are six types of hybrid funds each with a unique mix of equity and debt. These are ideal for beginners to test the waters, before going all in with equities.

Mutual funds are managed by a fund manager and a team of analysts and researchers who track market movements and control fund reallocation to maximise the fund’s performance and returns. To pay for their services, and the agent’s commission, fund houses factor in an expense ratio that is shared by all investors proportionately. When you invest in direct mutual funds, commissions are eliminated, thereby reducing the overall expense ratio, and giving you higher real returns.

Mutual funds are avenues for long term wealth creation. And to discourage investors from constantly churning their portfolio in the short term, mutual funds have the concept of ‘exit load’. Typically, for equity mutual funds, exit load is levied if you withdraw or sell investments within one year of purchase. In case of debt funds, the exit load period is reduced to 3 months. Liquid funds carry a 15-day or a 30-day exit load period.

Yes, there are mutual funds that carry lock-in period or a fixed maturity date. These can range from ELSS (lock-in period of 3 years) to close-ended funds like Fixed Maturity Plans (FMPs) and capital protection fund that are available for selling after a specific period. Since these funds are not open to regular buying and selling, fund manager and his investment bets play a critical role in fund performance.

Hybrid funds are a popular type of mutual funds that provide exposure to both equity and debt. While equity exposure aims to maximise capital appreciation, the debt portion provides stability as it invests in fixed interest generating debt instruments. There are 6 types of hybrid funds, ranging from aggressive hybrid funds (up to 80% allocation to equities) to conservative hybrid funds (up to 30%-40% exposure to equities).