Mutual Funds | Types Of Mutual Funds | Mutual Funds Investment | What is Mutual Fund & Types of Mutual Funds in India

mutual funds, types of mutual funds, mutual funds investment, mutual funds benefits, mutual funds in India, mutual fund stock options

Mutual Funds

What is a Mutual Fund?

The term Mutual Funds refers to a pool of money accumulated by several investors who aim at saving and making money through their investment. The corpus of money so created is invested in various asset classes, viz. debt funds, liquid assets and the like. Just like gains and rewards earned over the period of investment, losses are also shared by all the investors in equal proportion, i.e. in accordance with their proportion of contribution to the corpus.

Mutual Funds are registered with SEBI (Securities and Exchange Board of India) that regulates security markets prior to the collection of the funds from the investors. Investing in a Mutual Funds can be as simple buying or selling stocks or bonds online. Moreover, investors can sell out their shares whenever they want or need.

Types of Mutual Funds in India

There is a wide range of mutual funds in India, which is categorized on the basis of investment objective, asset class, and structure.

Types of Mutual Funds Based on Asset Class

Equity Funds These funds are invested in equity stock or shares of the companies. They provide a higher result, that’s the reason they are considered as high-risk funds.

Debt Funds These funds are invested in the debt like government bonds, company debentures, and fixed income assets. As they provide fixed returns, they are known to be a safe investment instrument.

Money Market Funds These funds are invested in liquid instruments, such as CPs, T-Bills etc. They are considered quite safe investment option, as you get an immediate yet moderate return on your investment. They are a perfect option for investors who want to invest their abundant funds.

Hybrid or Balanced Funds These types of funds are invested in different asset classes. There are times when the proportion of debt is lower than equity; it could be another way around as well. In this manner, return(s) and risk(s) strikes a perfect balance.

Sector Funds In these funds, investment is made in a particular sector or division of the market. For instance, infrastructure fund investors make investments restricted to infrastructure companies or investment instruments offered by the infrastructure companies. Returns on an investment are directly proportionate to the performance of that particular sector. The risk factor associated with these schemes varies sector to sector.

Index Funds These funds are investment instruments that represent specific index on the exchange in order to monitor the returns and the movement of the index, viz. purchasing shares from the BSE Sensex.

Tax-Saving Funds These funds make investment majorly in the equity shares. Tax-saving funds make an investor eligible to claim tax deductions under the Income Tax Act. Risk factor involved in these funds is generally on the higher side. At the same time, higher returns are offered if the funds’ performance is at par.

Funds of Funds These funds invest in the other mutual funds and the returns are dependent on the overall performance of the target funds.

Mutual Funds Benefits

As an investor, you have a plenty of mutual fund instruments to choose from. It is quite a task to select an investment instrument that gives you the benefit of every mutual fund vehicle in one option. That’s a good enough reason to widen the umbrella of mutual fund vehicles to reap the benefits offered by mutual funds. Apart from providing the flexibility to formulate investment plans based on the individual investment goals, mutual funds are beneficial in the terms of professional management, diversification, and affordability.

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mutual funds, types of mutual funds, mutual funds investment, mutual funds benefits, mutual funds in India, mutual fund stock options
Mutual Funds: What is Mutual Fund & Types of Mutual Funds in India