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What are mutual funds?

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What is a Mutual fund?

A Mutual fund is a professionally directed investment scheme which is usually run by an asset management company that brings together a group of people and invest their money in stocks, bonds, and other securities.

More in depth about Mutual Funds:

You as an investor can buy mutual fund ‘units’, which represent your share of holdings in a particular scheme. Mutual Funds Are registered with SEBI. They operate within the strict provisions and regulations created to protect the interests of the investor.

Let’s See The Different Types Of Mutual Funds:

  • EQUITY FUNDS-  These funds are funds which invest in stocks. Their goal is to grow faster than money market or fixed market funds, so there’s a bit risk of losing the money. One can choose from different types of equity funds which are; value stocks, large-cap stocks,mid-cap stocks, small-cap stocks, or combination of these.
  • DEBT FUNDS- Funds that invest in fixed income securities like bonds and shares are called Debt funds. The investment options in debt funds are; monthly income plan, short term plan, liquid fund, fixed maturity plan. A debt fund provides steady and low income in comparison to equity fund.
  • BALANCED FUNDS-  Balanced funds are funds which invest in a mix of equities and fixed income securities. They balance the goal of achieving higher returns against the risk of losing money.
  • MONEY MARKET MUTUAL FUNDS- Money market mutual funds invest in short term fixed securities such as government bonds and treasury bills, certificates of deposit. These are safer investments but with lower potential returns, compared to other mutual funds. Most of these types of investments are for short duration.
  • GILT FUNDS- Gilt funds are known to be one of the most secure investments. They invest in bulk in government securities. Also, they are the safest mutual fund units compared to other units, as such.

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