Mutual Fund
A mutual fund is a company that brings together money from many people and invest it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are know as its portfolio. Mutual funds are one of the most popular investment options these days.
TYPES OF MUTUAL FUNDS
Mutual funds in India are broadly classified into equity funds, debt fund and balanced mutual funds etc. we have broken down the types of mutual funds in detail below:
1. Equity mutual funds :- Equity funds invest mostly in shares of companies across all market capitalisation. A mutual funds is categorised under equity fund if it invest at least 65% of its portfolio in equity instruments. Equity funds have the potential to offer the highest returns among all classes of mutual funds. The returns provided by equity funds depend on the market movements.
The equity funds are further classified as below
- Small – cap funds
- Mid – cap funds
- Large – cap funds
- Multi – cap funds
- Sector or thematic funds
- Index funds
- ELSS (equity-linked savings scheme)
2. Debt mutual funds :- Debt funds invest mostly debt and fixed income instruments such as treasury bills, government bonds, certificates of deposit etc.
A mutual fund is considered a debt fund if it invest at least 65% of it’s portfolio in debt securities. Debt funds are ideal for risk-averse investors as the performance of debt funds is not dependent on market fluctuations.
3. Balanced or hybrid mutual funds :- Balanced or hybrid mutual funds invest across both equity and debt investment. The main objective of hybrid funds is to balance the risk-reward ratio by diversifying the portfolio.
4.Why should you invest in mutual funds? Below are five such benefits of Why to invest in mutual funds .
- Comparatively higher return on investment (ROI)
- Managed by experts
- Built – in diversification
- Ease of investing and monitoring
- Tax benefits and liquidity