Videos - Mutual Fund
Different types of Mutual Funds
It is not uncommon to hear the term mutual funds if you have stepped into the world of investments. There is only one opinion among finance experts, invest in mutual funds. For those planning to invest in mutual funds, this article is exactly what you need.
Mutual funds pull money from multiple investors and invest it in stocks, gold, bonds and many other instruments. In order to make an informed decision about where to invest in mutual funds, it is prudent to know the basic types of mutual fund schemes that exist. Investing in mutual funds in India depends on asset class, investment objectives, and risk tolerance.
Now based on the asset class you can wisely choose from the following funds:
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Equity mutual funds:
These are funds that invest in stocks or shares of different companies, so the risk involved here is relatively high. -
Debt mutual funds:
They invest in securities like government bonds, bills, debentures and will provide you with a fixed interest rate, thus generating a fixed income. -
Hybrid funds:
It is also known as a balanced fund. These are funds that invest both in equity and in debt.
Secondly, you need to decide your fund structure while investing in a mutual fund. You can invest in any of these three types of funds:
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Open-ended fund:
This fund does not have a maturity period; hence you can exit the investment at any time and you can invest as much as you like through the year and redeem it at the current nav; which is net asset value. -
Closed-ended fund:
Unlike the open-ended scheme, you cannot invest throughout the year. You can invest only during the initial launch period known as the NFO which is the new fund offer period. -
Interval fund:
It is a mixture of open-ended and closed-ended funds. These funds will be made available for purchase and can be redeemed only during the specific period as decided by the asset management company.
Now based on the investment objective you can choose to invest in one of the following funds:
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Growth funds:
In this fund your more significant asset will go into equity stocks and shares. If you plan to maximize wealth in the long term you should choose to invest in growth funds. -
Income funds:
Here, your investments will be made in deposits, government bonds, securities debentures and these will give you fixed regular income it is best suited type of fund for you if you are looking for a low-risk investment. -
Balanced funds:
These are hybrid funds where you can make some of your equity investment and some investment in debt.
I think these will help you make better investment decisions in mutual funds and you will be able to know which mutual fund suits you the best. Invest now for a better tomorrow.