There are a various types of mutual funds schemes to satisfy the requirements of various people. There are three kinds of mutual funds.
Equity or Growth Funds
- They invest mostly in equity, i.e. shares of companies
- The main goal is the creation of wealth or capital appraisal.
- They are among the most reliable long-term investments as they offer the potential to earn higher returns.
- These are only some examples.
- Large capital funds that invest in primarily established businesses
- ” Mid Cap Funds” which invest in mid-sized companies. Funds which invest in mid-sized companies
- Small Cap funds invest in small businesses
- Multi-cap funds invest in medium, large and small businesses.
- Funds referred to as “Sector” which invest in companies that are closely associated with a specific kind of business. For instance. Technology funds invest only in technology-related businesses
- Fonds which are “thematic” and focus on a specific theme. It is possible to think of the following: For instance, infrastructure funds invest in companies that could profit from the growth of the field of infrastructure
- Fonds for Tax-Saving
Income, Bond, or Fixed Income Funds
- They are invested in Fixed Income Securities like Government Securities or Bonds or Commercial Papers and Debentures or Bank Certificates of Deposits and Money Market Instruments like Treasury Bills Commercial Papers and so on.
- They are more secure and are suitable for income-generating.
- Examples are Examples include Funds Short-Term, Fixed Rate, Corporate Debt, and Dynamic Bond.
Hybrid Funds – types of mutual funds
- They can be invested through Equities or Fixed Income, and provide the highest combination of potential for growth as well as Income Generating.
- Examples include aggressive Balanced Funds and conservative Balanced Funds and Pension Plans and Child Plans Monthly Income Plans and many other plans.
What can mutual funds do to help in reducing risk?
There are a variety of risk factors. If you own a stake in a company, as an instance, you are at risk of market risk, price risk, or a company-specific risk. Each of these risks or any combination of them can cause a share to fall or even plunge. You van visit Mutual Funds Service online.
The Mutual Fund portfolio typically holds various securities. This permits ” diversification“. Diversification is one of the most significant advantages of investing in the Mutual Fund. This means that the performance of your portfolio is not affected by a drop in the value of one or less securities.
Liquidity risk is a different risk. What exactly is liquidity? It’s the process of converting funds into cash. Imagine an investor with an investment that is 10 years old and requires cash in the next three years. This is a typical liquidity issue. At the moment the main concern is cash access, not return. Mutual Funds, with their with their strict regulations in their structure, offer huge liquidity. Portfolios are designed to provide investors with the ability to invest and redemption.
Also read: Importance of Positioning