Types of mutual funds
You are here that means one thing is sure -you have made up your mind to invest in mutual funds , but in which type of funds to invest is still a dilemma.
The market is flooded with all types of small cap, mid cap , equity, bond and so on funds and that makes it difficult for a newbie to decide where to invest. So lets try to understand what the types of mutual funds.
1. Equity funds
These funds are invested in shares of companies with the primary objective of higher returns. But since these are invested in shares so the risk attached is also higher.
Equity funds coulde be regrouped into following types :
Small cap : the funds which are invested in shares of small size companies. These companies could be some start ups or new in industries having high gtowth potential. So the gains and risks both are higb in these funds.
Mid cap : these funds are invested in mid size companies which have presence of over a satisfactory period on market.
Large size : these funds are invested in large sized blue chip companies which have established themselves by there consistent performance in market for over a long period.
Multi cap : the funds are invested in a combination of above three types so that the risk and returns are in a balanced proportion.
'Sector' funds : theae funds invest in companies that belong to same sector. Eg banks, IT companies etc.
'Thematic' funds :
These funds are invested in companies having similar theme i.e, the companies which are related to each other so that their growth depends pn each other. Eg : infrastructure and cement industry.
2. Fixed income or Income or Bond funds
These funds are invested in highly secured govt bonds , debentures, treasury bill, certificate of deposits etc. These bonds guarantee assured retuns and the risk invelved is almost nil. But the returns are much lower than equity funds. So if you want to invest with minimum risk and and are satisfied with the smaller returns then this is your type.
3. Hybrid funds
As the name suggests this fund is a combination of equity and fixed income funds thus providing a judicious mix of returns and safety.
So decide your goals whether you want higher returns with comparitively riskier investments or vice - versa. But decide soon and start investing.
The market is flooded with all types of small cap, mid cap , equity, bond and so on funds and that makes it difficult for a newbie to decide where to invest. So lets try to understand what the types of mutual funds.
1. Equity funds
These funds are invested in shares of companies with the primary objective of higher returns. But since these are invested in shares so the risk attached is also higher.
Equity funds coulde be regrouped into following types :
Small cap : the funds which are invested in shares of small size companies. These companies could be some start ups or new in industries having high gtowth potential. So the gains and risks both are higb in these funds.
Mid cap : these funds are invested in mid size companies which have presence of over a satisfactory period on market.
Large size : these funds are invested in large sized blue chip companies which have established themselves by there consistent performance in market for over a long period.
Multi cap : the funds are invested in a combination of above three types so that the risk and returns are in a balanced proportion.
'Sector' funds : theae funds invest in companies that belong to same sector. Eg banks, IT companies etc.
'Thematic' funds :
These funds are invested in companies having similar theme i.e, the companies which are related to each other so that their growth depends pn each other. Eg : infrastructure and cement industry.
2. Fixed income or Income or Bond funds
These funds are invested in highly secured govt bonds , debentures, treasury bill, certificate of deposits etc. These bonds guarantee assured retuns and the risk invelved is almost nil. But the returns are much lower than equity funds. So if you want to invest with minimum risk and and are satisfied with the smaller returns then this is your type.
3. Hybrid funds
As the name suggests this fund is a combination of equity and fixed income funds thus providing a judicious mix of returns and safety.
So decide your goals whether you want higher returns with comparitively riskier investments or vice - versa. But decide soon and start investing.
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