Types of Mutual Funds Based on Investment Objectives

What is Mutual Fund? With respect to mutual funds, many creditors pool their investments in a trustworthy way. It is one such investing tool. Indeed, this investment is handled by an experienced team of finance professionals, known as the Asset Management Company (AMC), who further invest this accrued capital in various financial products such as securities, stocks, commodities, etc.

In fact, investors participating in mutual funds have a similar purpose, so it cannot be misunderstood to assume that the returns received by such forms of assets are proportionately assigned to the money invested. Few banks that provide mutual funds are ICICI, SBI, HDFC Bank, Federal etc. If it comes to eligibility and documents, though, various banks have specific requirements, and before investing in mutual funds you have to consult with the bank itself.

Now let’s seek to understand why and how necessary it is to invest in mutual funds.

Why should you invest in mutual funds?

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Despite not just one but for several purposes, people choose to invest in mutual funds. Yeah, it is, without a doubt, a smart choice to invest in mutual funds, for the following reasons.

• Mutual fund investing is nothing short of qualified investment management.
• For a large capital base, creditors may not typically fulfill the minimum investment criteria they might have in specific inventories.
• The risk of financial growth may be regularly tracked, ultimately minimizing risks of loss, with the help of a professional fund manager and a diversified portfolio of asset investments.

Okay, the mutual funds have the following types, based on the investment objective:

Equity Fund 

• Funding is mainly invested in stocks in equity funds.
• Returns are higher, so the risks are also higher.
• Equity funds may be rewarding because tax exemptions are made on long-term capital gains.

Debt Funds

• The funds are primarily invested in government or business shares and bonds in debt funds.
• Investments here can be short- and long-term and get lower risk featured fixed returns.
• You can benefit indexation benefits in order to save on tax in long-term investment.

Balanced Funds

• Balanced funds produce large stock earnings and stable yields, effectively helping to equalize the risk factor.

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Index Fund 

• Index funds are designed to represent the market index portfolio.
• You don’t have to track them vigorously.
• The risk is commensurate with fluctuations in the index.

Gilt Fund 

• Investment is in government securities solely so there is no default chance.
• Market volatility determines the value of the gilt fund units.
• The return-risk ratio here is similar to that in equity funds.

Global Funds

• Funds are held in assets outside India in global funds.
• Introduces another home diversification layer.
• The risks involved are understood by those investors who well know the international market.

Fund of Funds 

• Instead of assets, funds are directly invested in mutual fund
• Instead of market instruments, your investments are diversified in mutual fund
• The funds’ returns are going to be an average.