What are Mutual Funds and their types?

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Investment | November 26

What are Mutual Funds and their types?

Mutual funds are a form of investment that pool money from various investors to invest the collected funds in securities. These funds get managed systematically and the investors pay a small fee for such services.

Both retail and institutional investors can put their money in mutual funds. Mutual funds are also a great form of investment for new investors who aren’t acquainted to manage their stock market investments on their own.

Types of Mutual Funds

Mutual funds can be segmented into different categories based on their asset classes, structures, and investment objectives. Let’s take a look at the different types of mutual funds that you can invest in.

Based on Asset Class

· Equity Funds

· Debt Funds

· Money Market Funds

· Hybrid Funds

Based on Structure

· Open-Ended Funds

· Closed-Ended Funds

· Interval Funds

Based on Investment Goals

· Growth Funds

· Value Fund

· Sectoral Fund

· Index Fund

· Income Funds

· Liquid Funds

· Tax-Saving Funds

· Exchange Traded Funds

· International Equity Funds

Let’s discuss in brief about a few types of mutual funds that you can invest in.

Equity Funds

Equity funds pool money from investors and invest it in the shares of different companies. When you invest in equities, the returns or losses depend on the movement of the market value of those stocks. Investments in equity funds come with a greater risk as compared to debt funds.

Debt Funds

Debt funds pool money from investors and put that money in fixed income securities such as bonds, treasury bills, gilt funds, or liquid funds. These funds are less risky.

Money Market Funds

Money market funds pool money from investors and invest that money in money market securities such as bonds, treasury bills, and certificate of deposit (CDs). These funds are usually governed by banks or the government, and are hence less risky.

Hybrid Funds

Hybrid funds are a combination of equity funds and debt funds. These funds pool money from the investors and invest that money in more than one type of investment securities, such as stocks and bonds. These funds are perfect for beginners.

Now that we have talked about the various types of mutual funds, please feel free to share your opinions on investing in mutual funds. In case you have any more questions, you may connect with our financial experts at 0161-4155000.

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