There are numerous types of mutual fund schemes to satisfy the requirements of different individuals. There are generally three types mutual funds.

Equityor Growth Funds

• They invest primarily in equities, i.e. Shares of companies
• The most important goal is the creation of wealth or capital appreciation.
• They could generate higher return and are the best long-term investments.
• These are only some of the examples.
  • Large capital funds that invest primarily in established businesses
  • ” Mid Cap Funds” that invest in mid-sized businesses. Funds that invest in mid-sized enterprises
  • Small Cap funds invest in small businesses
  • Multi-cap funds invest in large, medium and small enterprises.
  • Funds called “Sector” that invest in businesses that are closely connected to a particular type of business. For e.g. technology funds invest solely in technology businesses
  • Fonds that are “thematic” and are based on a single theme. For e.g. for instance, infrastructure funds invest in companies that benefit from the expansion of the field of infrastructure
  • Tax-Saving Funds

Income or Bond or Fixed Income Funds

• They are Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.
• They are secure and can be used for income-generating.
• Examples are Examples would be Funds, Short Term floating rate, Corporate Debt, Dynamic Bond, Gilt Funds, etc.

Hybrid Funds

• They can be invested through Equities or Fixed Income. These investments can provide the best combination of Growth Potential as well as income generation.
• Examples include aggressive Balanced Funds as well as Conservative Balanced Funds as well as Pension Plans, Child Plans as well as Monthly Income Plans such as.

How can Mutual Funds help manage risk?

There are many risk factors. For instance, if own shares of the company, you are facing the possibility of a Price Risk or Market Risk or a company Specific Risk. Each of these risks, or any combination thereof, could cause a share to drop or plummet. You van visit Mutual Funds Service online.

But, in a Mutual Fund, a typical portfolio contains a variety of securities, thus offering ” diversification“. In fact, diversification is one of the main benefits of investing in the Mutual Fund. It guarantees that a drop in price of just one or a handful of security does not affect the portfolio’s performance significantly.

Liquidity risk is a separate risk. What is liquidity? It’s the process of the conversion of an asset to cash. Imagine an investor who owns an investment of 10 years old that is in need of cash within the next three years. This is a frequent liquidity problem. At this stage her primary concern is cash access and not returns. Mutual Funds , as per regulation and structure, can provide enormous liquidity. Portfolios are designed so that they provide investors the convenience of investment and redemption.

Also read: Importance of Positioning