About Mutual Funds, though we all would have heard this term a very few of us would have invested in Mutual fund. It is a sprouting field. We all consider Mutual funds a high risk option to invest but it’s actually not, it is a very flexible option. It all depends on how we select our favorable one. There is no common mutual fund that would suits all. It is of course a risk involved but it depends on willing we are planning the amount to be invested, our goals and the investment terms.
1. Based on maturity period of investment
I. Open-Ended – There is no fixed date for the maturity period the holders can buy and sell at any point of time.
- Debt/ Income– It is an apt one for those who look for a steady income. Here the majority part of the funds that are invested towards debt instruments and government securities. The appreciation is any way low .It basically involves low risk.
- Money Market/ Liquid –These schemes are opted by investors who look out to invest large amount of money in a short term instruments. They provide reasonable returns to investors.
- Equity/ Growth–They are ideal for people who are in the initial earning stages and look out for large returns in future. They are high risk but are very popular. The capital appreciation is good in long run.
Index Scheme – Here our investment replicates the movements of indexes such as Nifty and senses
Sectoral Scheme –Investment in sectors such as IT, pharma or infrastructure. They involve high risk and of course high returns.
Tax Saving – Usually taken up for tax benefits they are offer long term growth. A 3 year lock in period is common for such funds.
- Balanced– The income and growth are regular and balanced. They are an ideal option. They are an ideal option for investors who are aggressive and cautious…II.Closed-Ended –This scheme is available in India but the thing is we can invest only during the launch of the new offers.
- Capital Protection– As the name suggests our capital amount is safeguarded and we do get reasonable returns. Our invested amount gets matured along with the maturity period in its course.
- Fixed Maturity Plans (FMPs) – These schemes have a defined maturity period and the debt instruments mature along with the maturity of the scheme and we earn through the interest component.
III. Interval –Investors can trade at predefined intervals and it looks like a combination of both open and closed schemes.
3. Need to invest in Mutual Funds
The need for any person to opt for a Mutual fund is due to its pros as follows
Without spending our valuable time and money we could generate better returns irrespective of inflations. They are an ideal investment option for a long-term inflation adjusted growth.
An Experienced fund manager can support us accessing the market and takes financial decisions based on the performance and prospects and help us achieve our objective.
They are convenient in the means of low term investments, buying and selling of funds, the term investment amount selection.
When compared to stock markets the amount of investment in a mutual fund is relatively low and mutual funds processing are also less expensive.
our investments can be distributed on a diverse range of assists and hence the risk of loss is reduced.