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Which of the following is not a mutual fund scheme?

Which of the following is not a mutual fund scheme

Looking for the answer to the question below related to Financial Management ?

Which of the following is not a mutual fund scheme?


A. Equity schemes
B. Debt schemes
C. Balanced schemes
D. Mutual benefit schemes

The Correct Answer Is:

  • D. Mutual benefit schemes

The correct answer is D. Mutual benefit schemes. In this detailed explanation, we will discuss each of the options provided and why they are or are not considered mutual fund schemes.

A. Equity Schemes:

Equity schemes are an essential category of mutual fund schemes. They primarily invest in stocks or equities of companies listed on stock exchanges. The main objective of equity schemes is capital appreciation over the long term. They offer investors the potential for substantial returns, but they also come with higher risk due to the inherent volatility of the stock market.

Investors in equity schemes should have a longer investment horizon and a higher risk tolerance. These schemes are further classified into various sub-categories like large-cap funds, mid-cap funds, and small-cap funds, each with its own investment focus and risk profile. Equity schemes play a crucial role in helping investors participate in the growth potential of the stock market.

B. Debt Schemes:

Debt schemes represent another significant category of mutual fund schemes. These funds primarily invest in fixed-income securities like government bonds, corporate bonds, debentures, and other debt instruments. The primary goal of debt schemes is to generate regular income and preserve capital.

They are generally considered lower risk compared to equity schemes because they provide predictable returns in the form of interest payments and have lower volatility. Debt schemes are suitable for conservative investors or those looking for stable returns, such as retirees or individuals with short-term financial goals.

Within the debt scheme category, there are various sub-categories like liquid funds, income funds, and gilt funds, each with a distinct investment strategy based on the type of debt instruments they focus on.

C. Balanced Schemes:

Balanced schemes, also known as hybrid schemes, are indeed a recognized category of mutual fund schemes. These funds follow a balanced approach by investing in a mix of both equities and debt instruments. The allocation between equities and debt varies depending on the scheme’s mandate and objectives.

Balanced schemes aim to provide investors with the benefits of both asset classes. They offer the potential for capital appreciation through equities while also providing stability and income through debt instruments.

Balanced schemes are suitable for investors with a moderate risk appetite who want a diversified portfolio without the need for separate equity and debt investments. The diversification in these schemes helps reduce overall portfolio risk and volatility.

D. Mutual Benefit Schemes:

“Mutual benefit schemes” is not a recognized or standard category of mutual fund schemes within the mutual fund industry. While the term “mutual benefit” may be associated with various financial instruments or entities in different contexts, it does not correspond to a specific type of mutual fund scheme.

It’s important to note that the mutual fund industry is regulated, and various financial authorities categorize and classify mutual fund schemes based on their investment objectives, asset allocation, and risk profiles. Mutual benefit schemes may be confused with other financial products or entities, but they do not fall under the typical classification of mutual funds.

In conclusion, equity schemes, debt schemes, and balanced schemes are all established and recognized categories of mutual fund schemes. They serve diverse investor needs and preferences, catering to those seeking capital appreciation, regular income, or a balanced approach to risk and returns.

On the other hand, “mutual benefit schemes” does not fit into the standard classification of mutual funds and is not a common term used in the mutual fund industry. Therefore, option D is the correct answer as it represents a category that is not part of the conventional mutual fund landscape.

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