Mutual Fund
Mutual funds are financial vehicles that pool money from investors and invest them into stocks, securities, and various money-market instruments. Professionally managed, there are various categories of mutual funds depending on their underlying securities such as equity, debt, and hybrid.
Based on your risk appetite and investment horizon, you can invest in the mutual fund of your choice. You can either start SIP in mutual fund or invest a lump sum. They are one of the most prudent avenues of investment that can help you achieve your life goals.
Types of Mutual Fund
Equity Mutual Fund:
An equity mutual fund is a type of mutual fund that invests primarily into equities, i.e., stocks. Also known as stock funds, the main goal of an equity mutual fund is to generate higher returns. A major portion of the assets of an equity mutual fund is invested in equity shares of numerous companies in various proportions.
If you are an aggressive investor with a high-risk tolerance, you can opt for equity mutual funds to generate inflation-indexed returns in the long term. However, to generate the desired returns, you need to stay invested for the long haul.
Debt Funds:
As the name suggests, a debt mutual fund invests a significant portion of its assets in fixed-income securities such as corporate bonds, debentures and treasury bills, among others. One of the fundamental objectives of debt funds is to protect capital from the vagaries of the stock market.
Debt mutual funds invest in a range of securities as per their credit ratings. The higher the ratings, the less volatile the security.
Hybrid Mutual Fund:
A hybrid mutual fund typically invests in two or more asset classes. These funds usually hold 60% in stocks and 40% in bonds. One of the fundamental objectives of hybrid funds is to balance the ratio of risk-reward and optimise the return on investment.
A strategic mix of debt with equity components make balanced funds less vulnerable to market volatility. Equity components of the fund can generate good returns which helps capital appreciation, while debt components shield the investment from market volatility.
Benefits of Mutual Fund Investments
Diversification
Funds are invested in diversified asset classes which stabilises return risk equation.
Expert Management
Mutual Fund portfolios are expertly managed by experienced professional
Easy Liquidity
Transacting in best Mutual funds is as easy as trading in stocks on any market day.
Low on cost
One can start investing in best Mutual Funds with very small amounts.
Save your taxes
Save taxes by investing in best Mutual fund schemes with tax exemptions through ElSS schemes.
Disciplined Investing
SIP’s in best Mutual Fund help to curb unnecessary expenses and develop a disciplined approach towards investing.
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