Mutual Fund Types: Expectations vs. Reality

Mutual Fund Types: Expectations vs. Reality

When someone says the word “Mutual Fund” what exactly do you get the picture in your head? Its share market, loss, mediocre returns.

If your perspective is the same as above, then after reading this article you will change your view 180 degrees. In this article I will be explaining to you the different types of mutual funds for different requirements. So let's get started

Mutual Fund Types #1 Equity Mutual Funds

The Equity Linked Mutual Fund is the investment scheme where the fund manager selects stocks that are having growth potential and invests the money in them. The Fund Manager will have 360 degree information about the company's details so there are very less chances of losing the money, and you keep making money when the company grows

So there are market fluctuations that impact Equity Funds these are based on Macro (Country's Financial Health) and Micro (company Net Profit, Debt, Lien on Shares, New Product Launches, Product demand in the market etc) When investing in the stock mutual fund managers consider these parameters before investing.

When any of the Macro or Micro parameters are not good you may observe that your holding in a mutual fund may go down. Also the fund manager selects multiple stocks to diversify the risk. If one goes down others may recover and there may be no loss in your holding.


mutual fund types

Mutual Fund Types #2 Index Funds

Index funds is an investment scheme where the fund manager selects the same stocks that are part of the index, for example in India we have indexes such as Nifty, Nifty Next 50 etc. The index is a combination of best stocks that grow well and predict the growth of the economy. The Fund Manager blindly selects these stocks and invests in them when the index goes up you make good returns and when index goes down then your invested amount also decreases.

Mutual Fund Types #3 Debt Mutual Funds

Debt Mutual Fund is the investment scheme where the fund manager invests your money in Corporate Bonds, Government Bonds, Railway Bonds and Money Market Instruments that increase your income on a daily basis. This investment scheme is similar to Fixed Deposit but there is no tax deduction at sources by the mutual fund house. Instead you will have to pay the tax that you are levied on Debt Mutual Fund Redemption

Mutual Fund Types #4 Liquid Mutual Fund

Liquid Mutual funds are part of debt mutual funds where the fund manager invests your money in Commercial Paper, Government Securities, Treasury Bills and Term Deposits. Its like open ended scheme where investor will park his money for short term and can redeem at any time without any exit charges

Mutual Fund Types #5 Gold Mutual Funds

Gold Mutual Funds are a type of scheme where you are indirectly buying Gold. Fund Manager Invests your money into Various Gold ETF (Exchange Traded Funds), ETFs are managed by Asset Management Company. When Gold Market Prices across the world increase, your fund value also will increase.

Mutual Fund Types #6 Hybrid Mutual Funds

Hybrid Mutual Fund is a combination of Equity and Debt Fund contributing percentage 50-50 percent or 70-30 percent decided by the fund manager during the NFO (New Fund Offer). This fund tries to make a balance between equity and debt at the end of the financial year. If equity has performed well compared to debt some part of equity will be trimmed and will be invested in debt. If debt has given good returns compared to equity then debt will be trimmed and invested in equity to maintain balance.

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