Different Types of Mutual Funds - Definition and Types

 Different Types of Mutual Funds - Definition and Types

What is a Mutual Fund?

A mutual fund is a pool that is controlled by a fund manager. This is a trust that collects money from a group of people with similar financial goals and invests it in stocks, bonds, financial instruments, and/or other assets. Examples of mutual fund Equities (stocks), fixed-income assets (bonds and money market funds), or a mix of both equity and fixed-income securities.

12 Types of Mutual Funds 

1. Low-risk mutual funds - Online trading account in Indore India

Investors are hesitant to engage in riskier funds in the case of a rupee devaluation or an unanticipated national catastrophe such cases, fund managers recommend investing in one or more liquid, short-term, or hedge funds. Returns might range from 6-8%, although investors are free to swap when valuations stabilize.

2. Medium-risk mutual funds - Online trading account in Indore India

Risk is inherent in this since the fund manager invests part in debt and others in equity funds. The NAV is not particularly volatile, and typical returns might range from 9 to 12%.

3. High-risk mutual funds - Online trading account in Indore India

Any high-risk fund requires active investment management and is suitable for risk-averse investors seeking large returns in the form of interest and dividends. Because they are vulnerable to market fluctuations, regular performance monitoring is essential. Expect 15% returns, with most high-risk funds providing up to 20% returns.

4. Equity funds - Online trading account in Indore India

Equity funds, which primarily invest in equities, are sometimes known as stock funds. They invest the money collected from numerous investors from varied backgrounds in different firms' shares/stocks. The profits and losses connected with these funds are determined by how the invested shares perform in the stock market (price increases or decreases). 

5. Debt funds - Online trading account in Indore India

Debt funds generally invest in fixed-income instruments including bonds, securities, and treasury bills. Fixed Maturity Plans (FMP), Gilt funds, mutual funds, short-term plans, long-term bonds, and monthly plans are some of the fixed-income instruments they invest in. Because these investments have a fixed interest rate and maturity date, they can be a great option for investors with no money who are looking for variable income (interest and principal) and take less risk.

6. hybrid funds - Online trading account in Indore India

As their name suggests, balanced funds are a good mix of bonds and equities, covering the difference between equity and debt funds. The ratio may be variable or constant. In a nutshell, it combines the best of two mutual funds by investing 60% of assets in stocks and the balance in bonds, or vice versa. Hybrid funds are suitable for investors who prefer to take on more risk for the benefit of "debt plus return" rather than follow a low but consistent investment strategy.

7. Growth funds - Online trading account in Indore India

Growth funds typically invest large amounts of their assets in stocks and growth sectors, making them ideal for investors (typically millennials) who have limited funds to invest in risky strategies. life (but with a great return) or those interested in the program.

8. Money Market Fund - Online trading account in Indore India

In the stock market, investors make purchases. Similarly, investors invest in the stock market, often called the capital market or the spot market. The government works with banks, financial institutions, and other organizations by issuing financial instruments such as bonds, bank bills, savings accounts, and certificates of deposit. Fund management invests your money and pays monthly dividends. Choosing a short-term plan (no more than 13 months) can reduce the risk of investing in such funds. 

9. Income funds - Online trading account in Indore India

Mutual funds are mutual funds that invest in various forms such as bonds, certificates of deposit, and securities. Income funds have historically offered investors higher returns than deposits because they are managed by professional fund managers who maintain the portfolio in sync with rate swings without jeopardizing the portfolio's creditworthiness. They are best for risk-free investors with a time horizon of 2-3 years.

10. Liquid funds - Online trading account in Indore India

Liquid funds, like income funds, are debt funds since they invest in debt instruments and money market funds with maturities of up to 91 days. The highest amount that may be invested is Rs 10 lakh. The net worth calculation method separates liquid funds from other debt funds. The NAV of liquid funds is computed for 365 days (including Sundays), whereas the NAV of others is calculated for just business days.

11. Tax Saving Fund - Online trading account in Indore India

ELSS, or Equity Linked Saving Scheme, has grown in popularity among all types of investors over the years. Not only do they offer the benefit of wealth maximization while saving you from taxes, but they also have the shortest lock-in period of just three years. They are known to earn 14-16% interest returns by investing in stocks (and related products). These funds are best suited to long-term investors.

12. Pension Fund - Online trading account in Indore India

Investing a percentage of your salary in a pension fund over a lengthy period to protect your and your family's financial security after retiring from regular employment can cover most scenarios (such as a medical emergency or a child's wedding). Relying only on funds to get through your golden years is not advised since savings (no matter how large) are depleted. EPF is one example, but there are several profitable programs offered by banks, insurance companies, and other organizations.

Read our more blog…. Five steps to choose the right Online Trading Platform for Beginners - Best trading platform in Indore India 

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