What is Mutual Fund? Learn Types of Mutual Funds

A mutual fund is a professionally managed investment trust which collects money from many investors and invests the money in securities like stocks, bonds, money market instruments etc.
Mutual Fund

A mutual fund is a professionally managed investment trust which collects money from many investors and invests the money in securities like stocks, bonds, money market instruments etc. Investment in mutual funds is considered one of the safe investments in the long run. However, in the short run a mutual fund can give you negative returns too. As returns from the collective stocks bought is shared among investors the losses also shared by the investors. Investment in mutual fund is as easy as buying stocks or bonds on an online platform. If investor wants to sell their mutual fund units any time they can sell the units any time.

Types of Mutual Funds in India:

There is a wide range of mutual funds in India which is available for investors depending upon the risk and return appetite of the investor. There are few different types of mutual funds are explained in detail depending upon the need of investor.

  1. Equity Funds: The sum of money collected from investors is into equity shares in this type of fund. The equity funds are considered to be very risky among all other mutual funds. The money is invested directly into stock market. These types of mutual fund schemes are generally for the investors who have good risk appetite.
  2. Debt Funds: The money collected from investors is invested in corporate debt, debt issued by banks, gilts and government securities. These types of funds are mostly suitable for the investors who have low risk appetite. However, the returns from these types of funds are comparatively low.
  3. Balanced Funds: This types of fund parks your money in both equity shares and debt. The objective of this fund is to gain return from both equity and debt market. The percentage of money which the fund put in each section is predefined by the company. However, they can change the percentage of money allocation according to the market situation.
  4. Money Market Mutual Funds: These types of funds are called liquid funds. These types of funds invest money in government securities in bulk. They invest the money in type of instruments which are safer like Certificates of Deposit, Treasury and Commercial Paper. These types of funds are invested for smaller duration.
  5. Gilt Funds: These funds are considered most secure instrument present in India. These types of funds invest bulk of their money in the government securities. As the government back gilt funds so this type of funds are safer than other funds.  

How to Buy Mutual Funds?

If an investor who is looking at the most popular mutual fund SIPs, there are several ways to buy them. You can apply for mutual funds through applications or even you can buy mutual funds online through a website. After the registration the mutual funds will give you login and password.  You need to comply with Know Your Customer Requirements before you apply. You can call the several toll free numbers of mutual funds, which can give you all details on how to invest.

To get more Financial Updates on Mutual fund visit sharpcareer.

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