The convenience of mutual fund investment has made it a popular investment channel among individuals looking to gain access to a diversified range of asset classes such as equities, bonds, fixed income securities, etc. However, choosing an ideal option for yourself from an extensive range of mutual fund options depends on your investment goal. To facilitate the process of mutual fund investment, you can take help from a mutual fund advisor in Mumbai or any other city suitable for you.
Let us look at the five most common types of mutual funds in the financial market:
Also called money market mutual funds, it works like any other mutual funds and is considered a safe investment option having a low potential return in comparison to others. The investment is done in highly liquid instruments such as cash or short term fixed securities including government bonds, treasury bills, commercial paper, bankers’ acceptances and certificates of deposit.
As the name suggests, balanced funds are a perfect mix of stocks and bonds. However, at times they have a portion of equities higher than debt and vice versa to balance out the associated risks and returns. If you are looking for safety with income and a bit of modest capital appreciation, then balanced funds can be a useful investment option for you.
Also known as stock mutual funds, equity funds invest in the equity shares of various companies. To grow faster than fixed-income funds and garner higher returns, they come with higher risk as compared to others. A practical and beneficial investment vehicle they are ideal for those who do not have a large capital to invest or are not quite familiar with financial investing.
There are various types of equity funds to choose from such as, income funds (stocks having large dividends) growth stocks (which normally don’t pay dividends) value stocks, mid-cap stocks, large-cap stocks or a combination of any of these. Equity funds can also include some specialty funds namely in infrastructure, FMCG, banking, etc.
Evident from their name, fixed-income funds involve investment done primarily in fixed-income instruments such as government bonds, investment-grade corporate bonds, high-yield corporate bonds, and debentures. Often considered lower risk funds focusing on capital gains, high-yield corporate bond funds are usually considered riskier than government bonds and investment-grade bonds.
Funds that invest in other mutual funds are known as funds of funds, thus their returns also depend on the performance of the target funds. Quite like balanced funds, they are considered relatively safe for the investors as their portfolio includes different underlying portfolios of other funds.
Above mentioned are five common types of mutual funds in the financial market. If invested wisely, they can bring you lucrative returns. Therefore, it is advisable to seek assistance from a mutual fund advisor in Nasik or a city ideal for you to get an in-depth understanding and make a profitable choice.