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Types of Mutual Funds, Objective and Structures

Article 31 Aug 2019 1355 0

Mutual Funds

What is a mutual fund? How can you buy a mutual fund? What is the return in this, how much money will you get in 5 years? In this post, we will give all the information about mutual funds, so that you can know about mutual funds and you can invest in it and increase your wealth.

What is a mutual fund?

Mutual Fund refers to a pool of funds deposited by many investors who aim to save and make money through their investments. The money thus collected is invested in different asset classes, ie debt funds, liquid assets, etc. The gains or losses earned during the investment period are shared in equal proportion by all the investors.

Mutual funds are registered with SEBI (Securities and Exchange Board of India) that range from investors raising capital to control the market, investing in mutual funds, buying or selling in the form of online stocks or bonds. Has to be simplified. With which investors can sell their shares whenever needed.

Types of Mutual Funds?

There is a wide range of Mutual Funds in India, which are classified on the basis of investment objective, asset class, and structure.

Mutual Funds Based on Asset Class

1. Equity Funds - These funds are invested in Equity stock or shares of companies (Share). They provide great benefits, which is why they are considered as high-risk funds. Because equity stocks and shares have higher volatility.

2. Debt Funds - These funds are invested in loans such as government bonds, company debentures, and fixed income securities. As they provide fixed returns, they are known as a safe investment instrument.

3. Money Market Funds - These funds are invested in liquid instruments such as CPs, T-Bills, etc. They are considered a fairly safe investment option, as you get immediate yet moderate returns on your investment. They are an ideal option for investors who want to invest their abundant wealth.

4. Hybrid or Balanced Funds - These types of funds are invested in different asset classes. There are times when the ratio of equity to debt is low; It can also be another way around, in this way, returns and risks strike a right balance. 

5. Sector Funds - Investment in these funds is done in a particular sector or market segmentation. For example, infrastructure fund investors restrict investment to investments provided by infrastructure companies or infrastructure companies. The return on investment is directly proportional to the performance of that particular sector. Risk factors associated with these schemes vary from region to region

6. Index Funds - These funds are investment instruments that represent specific indexes on the exchange to monitor returns and movement of the index, such as the purchase of shares from BSE SENSEX. 

7. Tax-Saving Funds - These funds invest in equity shares. Tax-saving funds make an investor eligible to claim tax deduction under the Income Tax Act. The risk factors involved in these funds are usually higher. At the same time, higher returns are offered if the fund's performance is equal.

8. Funds of Funds - These funds invest in other mutual funds and the returns are dependent on the overall performance of the target fund. 

Mutual Funds Based on Structure: 

1. Open-Ended Funds - These Mutual Fund Investments Mutual Fund Investments Net Asset Value (NAV) These funds provide liquidity to the investors, hence they are preferred by the investors.

2. Close-Ended Funds - These mutual fund investment instruments deal with units that can be purchased only during the initial period. The units are eligible for redemption at specific maturity date. To provide liquidity, these schemes are listed on the stock exchange for trading purposes.

Mutual Funds Based on Investment Objective

1. Growth Funds - These schemes make investors invest their money in equity shares. The purpose behind this is that it provides capital appreciation. Although these funds are considered risky, they are considered ideal for investors who have invested time that is long term.

2. Income Funds - With these schemes, you can definitely invest your money in fixed-income instruments such as debentures, bonds, etc. They serve the purpose of providing regular income and capital protection to investors. 

3. Liquid Funds - Money invested in liquid funds is invested in short-term and sometimes, short-term investment instruments like CP, T-bills, etc., which is the sole purpose of providing liquidity. These plans are low on the risk factor and they provide generous returns on investment. These schemes are ideal for investors with short-term investment timeframes. 

Mutual Fund Investment Objectives

There are different types of mutual funds with a specific target set. A mutual fund in investment objectives is the goals set by the fund manager for the investment of mutual funds, which make an important decision - which funds and funds should be included in the funds' portfolio. 

For instance, Mr. Sharma plans to invest in the equity market to fulfill his investment objective, ie achieving his long-term financial goals like overseas education of the child and long-term capital appreciation while completing his retirement. Depending on the purpose of the investment, mutual funds in Hindi can be classified into 5 categories. Is obtained. There are the following categories: 

1. Aggressive Growth Funds - Aggressive growth funds are more prone to sudden growth and their value increases rapidly. Investors have invested in aggressive growth funds aimed at bringing higher returns. Since the fund is witness to sudden growth, the risk factors are very high. The reason for this is that money with a sudden price appreciation potential loses its value at a high rate at a time of declining economy. 

Investing in these funds is an ideal option for investors who are ready to invest their money for a period of five years and their investment objective revolves around a long-term perspective. Investors who lose the value of their investment Can not achieve the potential of an aggressive investment fund for those whose investment objective is to conserve capital. 

2. Growth Funds - In Growth Fund's investment, growth gives more return on investment. The investment portfolio will consist of a mix of small, medium and large-sized corporations. The fund portfolio will include that to invest in a well-established and stable corporation. In addition, the fund manager will invest a small portion of the funds in a small established company. 

3. Balanced Funds - It is a mixture of income and development funds, which is called a balanced fund. To meet these funds there is a mix of targets. The goal is to provide investors with current income and at the same time, it offers growth potential. The goal of these funds is to fulfill various objectives that investors are looking forward to. 

4. Income Funds - Funds generally invested in the category of fixed income securities are known as income funds. Regular Income for These Fund Investors (R) These funds are ideal for investors who have retired, as they will have a regular supply of dividends. The fund manager will invest in the company's fixed deposits; Debentures etc. And it will provide regular income to the investors. It is a stable investment option, yet has moderate risk factors. With interest rate fluctuations, the prices of income share funds will be affected accordingly, according to the bond. Also, the rate of inflation takes a toll on the income fund.

5. Money Market Mutual Funds - These funds attempt to maintain capital withholding. This is why investors should be very cautious to invest in these funds. Although money market mutual funds have the ability to get higher interest rates than bank deposits compared to interest rates, the profits are not there. Moreover, the risk factor involved is very low.

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