Different types of Mutual Funds: Here are few points to note before you make any investment
One industry which is continuously evolving today is the Mutual Fund industry. A Mutual Fund is an investment fund which is professionally managed and has no legal definition. It is applied to all open-ended investment companies, who are the collective investment vehicles that are sold and regulated to the common public on a daily basis. However, according to a report, mutual funds are still considered as a risky option.
But in many cases it is considered as one of the most flexible, comprehensive and hassle free mode of investment. So if you are also planning to invest in mutual funds then here few things that you should keep in my mind.
Different kinds of Mutual Funds are:
- Open-Ended
In this scheme the investors are allowed to buy or sell their units at any point of time, it does not have any fixed maturity date.
Debt/ Income – In this scheme, a big part of the invested funds are constructed towards debentures, government securities, and various other debt instruments. Although the capital gain in this scheme is low, it is relatively a low risk investment avenue which is ideal for an investors aiming for a steady income.
Money Market/ Liquid – This scheme is ideal for an investor looking forward to utilize his surplus funds in short time span while waiting for better options. This scheme seeks to provide reasonable returns to the investor.
Equity/ Growth – Equities are popular among the mutual fund category amongst the retail investors. Although it is a high-risk investment, investors can expect a good capital appreciation in the long run. If you are at a good earning stage and looking for some long-term benefits, this scheme could work as an ideal investment.
– Balanced – In this scheme the investors are left to enjoy the growth and income at a regular interval period. In this scheme the funds are invested in both equities as well as in the fixed income securities. The scheme is ideal for the cautiously aggressive investors.
2-Closed-Ended
This scheme has a particular maturity period in India, and an investor is only able to invest during the launch period referred as the NFO (New Fund Offer) period.
– Capital Protection – The main objective of this scheme is to protect the actual investment amount while trying to deliver a reasonable return. These investments are in the form of a high-quality fixed income with a fringy exposure to equities. These mature with the maturity period.
– Fixed Maturity Plans (FMPs) – FMPs, as the name says, are schemes with a fixed maturity period. It normally comprise of debt instruments which mature in a straight line along with the maturity of the scheme itself, earning through an interest component (called coupons) of the securities stated in the portfolio. FMPs are normally managed with a resistance, i.e. there is no combat trading of the debt instruments in the portfolios. The expenses which are charged in the scheme are hence, generally lower than the actively managed schemes.
3-Interval
Functioning as a combination of both open and closed ended schemes, this scheme allows investors to trade units at a pre-defined interval.
