Types of Mutual Funds are the right way to understand that when it comes to the world of investing there are three words which come to the mind; intimidating, overwhelming and scary. There are plenty of risks that are involved when investing, but at the same time, there are ample of lucrative rewards also. There is nothing better than educating oneself by conducting one’s own financial knowledge. In turn, this will help a person to make not only the right but smart investment decisions.
Some of the types of mutual funds include:
Close-ended fund/scheme: Having a pre-determined maturity period, these funds are open for subscription only a limited period of time. They may be invested in at the time of the initial public issue and thereafter. This maturity period often lasts between 5-7 years.
Open-ended fund/scheme: Being the most common type of mutual fund for investment, open-ended funds are those where the investors can choose to buy and sell, invest in the diverse securities as per their convenience. There is no fixed limit as per the number of shares, investors or size of the fund.
Interval schemes: Types of Mutual Funds combining the highlights of open-ended and in addition close-ended schemes, interval schemes can be traded as well as open for sale and redemption amid pre-determined intervals at the NAV related costs. Fixed maturity plans (FMP’s) are examples of these schemes.
Are mutual funds safe in India?
To plan a secure future for your loved ones is not easy and it takes a lot of patience for the generation today to think about the problems and security of their future while planning things for themselves at present. Mutual funds investment is one simple solution to all your problems and it provides you with a safe future. You can always be sure about the mutual funds because it is an initiative that has been taken up by the two very respectable bodies in collaboration and i.e. the Government of India and the Reserve Bank of India.
This collaboration ensures that your money is in the safe hands and you can be carefree while investing your money with the two most honored and transparent bodies of India. It also ensures that even if you don’t have much knowledge of the financial sector and you don’t want to get cheated in the entire process of financial planning from some amateur or some biased financial advisor then mutual funds are a great option for you to be trusted.
Moreover, what can be better than your money being kept secured in the hands of the most powerful banking institution and financial body and also with the government? So just trust yourself before investing in the mutual funds.
Popular mutual funds in India
Debt funds: A debt fund is a kind of Mutual Fund that invests in fixed-income securities. Under this fund, your money will be invested in short-term bonds, long-term bonds, securitized funds, floating rate debt, and money market instruments.
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Equity funds: An equity fund is a kind of Mutual Fund that invests money primarily in stocks. There are both actively and passively managed funds.
Equity-linked savings schemes: This is an equity Mutual Fund that is close-funded in nature. It enables you to save taxes and also helps you develop your wealth. You can enjoy tax deductions as per the Income Tax Act under Section 80C.
Diversified funds: This type of Mutual Fund allows you to invest your money in diverse sectors or industries. You can spread your investments across various industries in the market.
Gilt funds: These funds apportion money to securities that are offered by the state or central governments. These funds come without any default risk.
Index funds: Under this category of Mutual Funds, your money will be invested according to how a stock market index functions. The NAV for these funds will be nearly taken after the ascent or fall in the record.
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Liquid Mutual Funds: Liquid Mutual Funds are investment plans that will allocate funds primarily to money market instruments such as treasury bills, term deposits, certificate of deposits, commercial papers, etc. These funds come with a lower maturity period.
Debt-oriented hybrid funds: Under this classification of Mutual Funds, your money will be fundamentally invested in debt the rest of the part will be invested in equity. It is a blend of both debts as well as the equity investment.
Arbitrage funds: These funds are treated as equity plans for taxation purposes. These funds invest both in the cash market and the derivatives market.
Dynamic bond funds: Your money will be invested in debt and money-market instruments. The maturity of the fund will vary according to the investments that it makes.
The quantity of Mutual Funds made accessible to the overall population has expanded fundamentally over the past few years. Therefore, you now have a great number of alternatives to look over and paying little respect to which class you wish to invest in.