Mutual funds are a safer way to invest. They are essentially a pooling of small resources by individuals, handed over to professional fund manager to invest based the objectives of the scheme, there are a variety of options to choose from, right from the number of fund houses to the types of schemes available. It is convenient and regarding to be invested in mutual funds. There are various classifications and types of mutual funds:

1. Growth Schemes: These are schemes which are mostly concerned with capital appreciation over the medium to long term. Typically these funds would invest a majority of their funds in equity of companies.

2. Income Schemes: These are schemes which invest in debentures/ government securities sponsored by the government and also by companies.

3. Balanced Schemes: This scheme tries to balance between the income and allocation of assets depends on the offer document of the scheme. Most of the times, the equity component exceeds 50 percent of the investment.

4. Money Market schemes: These schemes invest in very liquid instruments and which bear almost no risk. The typical investments would be in treasury bonds, commercial paper etc.

5. Monthly Income Plans: These are also a variant of balanced schemes, the difference being that they have to provide options of periodic payouts. In most cases, they have to declare monthly dividends; else they can also have the option of quarterly dividend payouts. Also, the equity component most of the times does not exceed 30 percent.

3. Advantages of Unit Linked Pension Plans (ULPPS): Earlier there were only participative pension where one’s final retirement corpus from the plan depended on the various bonuses declared by the company. The company bore the investment risk. Most such plans had some form of guaranteed returns because of which companies were conservative in investing and the corpus had limited growth. Now, the guarantees are lesser and are available only for a part of the plan’s tenure which is 3-5 years. ULPPs provide an option for higher growth possibilities. Like other unit linked insurance plans (ULIPs), in ULPPs,  a part of the premium is used to pay for one’s life cover and the remaining amount, after deductions for charges such as fund arrangement, policy administration and others, gets converted into units. The net asset value of the units grows with the company’s investment performance, even as one keeps adding to the investment pool with premiums. On retirement, one gets a part of the amount as lump sum with the remaining amount as annuities for a certain period or for life. In ULPPs, the investor bears the investment risk, which depends on the debt equity mix of the plan. In return for the higher risk, the investor gets the benefit of higher investment growth in the long term than participate policies offer, especially from equity exposure. Also, unlike participates plans, with ULPP’s one gets to know the investment performance through regular disclosures. One can also increase investment amounts with top-ups or switch to a lower or a higher risk variant of the plan on expectations of market turbulence, especially when one is nearing retirement.