Types of Mutual funds can be categorize based on the different schemes and thier investment options. We have listed different types of mutual funds in india and how this type of mutual funds work?
What are the different types of mutual funds? So, There are several ways to categorize mutual fund schemes. Let’s check out a few of them first of all schemes can either be classified as open-ended schemes or close Ended schemes
What is an open ended fund/scheme?
Open ended fund/scheme means that its open for business on all business days. So, You can invest or withdraw your money on all business days. Liquidity is the key feature of open end scheme.
What are close ended funds/schemes?
Close ended funds/schemes have a stipulated maturity period. for eg. three months, six months, year Or more. Unlike the open ended funds that’s open for business on all business days. Close ended funds are open for purchase only during the initial launch and for redemtion At specified periods of time either immediately post launch or later depending on when the AMC specifies.
Mutual fund schemes can be classified according to the investment objective. Such schemes maybe open-ended or Close-ended schemes as described earlier. Let’s take a look at some variations equity funds. The aim of growth funds is to provide capital appreciation over a medium to long-term period these funds invest in equity shares of companies and therefore offer the investor the potential for growth such schemes invest a major amount in equities.
Mutual Funds Types :
Mutual funds types can be classified based on thier operation and investment type. Like euqity, debt, ELSS, or governament bonds or securities and Index. The different types of mutual funds are given below:-
Types of Mutual Funds:-
1. Money market Mutual funds
These funds invest in short-term fixed income securities like government bonds, treasury bills, bankers’ acceptances, cash equivalent and certificates of deposit. They are generally consider to be a safer investment, but they have a lower potential returns then other sorts of mutual fund schemes. Indian market funds attempt to keep their net asset value (NAV) stable at $10 per security. This is mutual funds types number one.
2. Fixed income Mutual funds
These funds buy investments that pay a hard and fast rate of return like. Government bonds, investment-grade corporate bonds and high-yield corporate bonds. They aim to possess money coming into the fund on a daily basis, mostly through interest that the fund earns. This Types of mutual funds schemes are very less. They are High-yield bond mutual funds are generally more riskier than other funds that hold government and debt investment-grade bonds.
3. Equity Mutual funds
These funds invest in stocks. These Equity mutual funds aims to grow much faster than other market or fix income funds, So Generally there is a risk that you simply could lose money. you’ll choose between differing types of equity funds including people who concentrate on growth stocks (which don’t usually pay dividends), income funds (which hold stocks that pay large dividends), value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of those. This types of mutual funds are huge because equity investment gives more return.
4. Balanced Mutual funds
These funds invest during a mixture of equities and glued income securities. they struggle to balance the aim of achieving higher returns against the danger of losing money. Most of those funds follow a formula to separate money among the various sorts of investments. they have a tendency to possess more risk than fixed income funds, but less risk than pure equity funds. Aggressive mutual funds hold more equities of the company and fewer bonds or governament securities, while conservative funds hold fewer equities relative to bonds.
5. Index Mutual funds
These funds aim to trace the performance of a selected index like the S&P/TSX Composite Index. the worth of the open-end fund will go up or down because the index goes up or down. Index funds typically have lower costs than actively managed mutual funds because the portfolio manager doesn’t need to do the maximum amount research or make as many investment decisions.
6. Specialty Mutual funds
These funds specialise in specialized mandates like land, commodities or socially responsible investing. for instance, a socially responsible fund may invest in companies that support environmental stewardship, human rights and variety, and should avoid companies involved in alcohol, tobacco, gambling, weapons and therefore the military.
7. Fund-of-funds Mutual Funds
These funds invest in other funds. almost like balanced funds, they struggle to form asset allocation and diversification easier for the investor. The MER for fund-of-funds tend to be above stand-alone mutual funds.
Diversify by investment style
Portfolio managers may have different investment philosophies or use different sorts of investing to satisfy the investment objectives of a fund. Choosing funds with different investment styles allows you to diversify beyond the sort of investment. It are often differently to scale back investment risk.
4 common approaches to investing
Top-down approach – looks at the large economic picture, then finds industries or countries that appear as if they’re getting to had best. Then invest in specific companies within the chosen industry or country.
Bottom-up approach – focuses on selecting specific companies that do well, regardless of what the prospects are for his or her industry or the economy.
A combination of top-down and bottom-up approaches – A portfolio manager managing a worldwide portfolio can decide which countries to favour supported a top-down analysis but build the portfolio of stocks within each country supported a bottom-up analysis.
Also Read: Investing For Beginners
Technical analysis – attempts to forecast the direction of investment prices by studying past market data.
You can study a fund’s investment strategy by reading its Fund Facts and simplified prospectus.
Conclusion- Types of mutual Funds
The different types of mutual funds in india is explain from basic to advance and how this types works in different mutual fund schemes. Hence this article about types of mutual funds can help you understand the right type/scheme you want to invest in future.