Know More about Mutual Funds and It’s Types

What are mutual funds?

Mutual funds just like the name suggest is a pool of funds created for investments. This has gained prominence in the last few years due to several advantages over investing in stocks directly. Mutual funds do away with a lot of risks associated while investing in stocks and still enables an investor to participate in the growth of equities and stock markets. The probability of losing money in a mutual fund is a lot lower as compared to stock investments. Reasons for the same are many. Three most important reasons are:

  • Research-based investments
  • Diversification
  • Strong regulations

Let’s have a close towards different types of mutual funds:

Different Types of Mutual Funds:

There are various kinds of mutual funds where you can invest your money to generate the high amount of profit:

  • Equity Funds-If the fund you are investing in equities of listed companies then the fund is known as Equity Fund. These funds have a long-term growth and are best suited for long-term investors. These funds carry the highest amount of risks and their returns are directly dependent upon the kind of equities they invest in and performance of the fund manager. Equity funds are further classified in various types, like Index funds, Diversified funds, and Sector specific funds etc. They are tax-free after 1 year. To know the type that suits you the best go ahead and connect with
  • Tax Saving Funds-Equity funds are tax saving funds if they qualify for tax exemption under sec 80 CC of the Income tax act. All those investors who are looking for good double-digit returns and long-term investment opportunities should go ahead and give ELSS (Equity Linked Savings Schemes- another name for Tax Saving Funds) a try. Funds Apart from tax benefits they can generate wealth and even look at meeting one or more of their financial goals.
  • Fixed Income Funds-Funds that invest in Corporate bonds, commercial papers, debentures, government securities, and other types of money market instruments are known as fixed income funds. These funds are a good source of generating a fixed return and are considered low risk. They are taxable funds. However, the returns generated by them is certainly better than other conventional products like FD’s etc. They are further classified as long-term debt, short-term debt, Liquid funds etc.
  • Balanced funds-A combination of debt and equity funds are called Balanced or Hybrid fund. They are combined with debt so that risk can be mitigated. Also, note that a balanced fund can be tax-free only if the equity component is minimum 65%. Otherwise, it is taxed as a debt fund.

So, these are some kinds of mutual funds that can help you conserve capital, beat inflation&generate wealth. Moreover, investors can opt for online mutual fund investment option. If you are a first-time investor connect with mutualfundwala to get insight on what suits you the best. We shall assist you with KYC formalities to meeting your financial goals.