Mutual fund definition – Mutual funds refer to a pool of money gathered by various investors who aim at making and saving money through their investment.
The corpus of money so created is invested in many debt funds, asset classes and liquid assets. Just like rewards and gains earned over the period of investment. In mutual funds losses are shared by the investors equally in accordance with their contribution.
These funds are registered with the Securities and Exchange Board of India (SEBI) that manages security markets prior to the gathering of the funds from the investors. Investing in mutual funds can be as simple as selling or buying bonds or stocks online. Therefore buyer can sell out their shares whenever they need or want.
There is a variety of mutual funds in India, which is categorized on the basis of the asset class, investment objective and structure.
Types of mutual funds based on the asset class:
Types of mutual funds depend on the investment objective:
Types of mutual funds based on the structure:
Different types of mutual funds have a specific goal set. The fund manager sets the goals for the mutual fund investment.
Depending on the objective of the investment, mutual funds are divided into 5 categories:
If you invest in one mutual fund then the risk factor becomes higher. But if you invest your capital in different mutual funds then the risk factor becomes lower. Here if one fund is not yielding good returns then you will be protected by the other fund.
Start With Your Financial Needs
Every person has a different need and they should invest according to their needs. Factors like risk threshold, financial goals, capital and time period affect the investment decisions.
If you are willing to invest in mutual funds then you have plenty of options available in the market. It takes lots of time to choose which one is best for you. Mutual funds are beneficial in the terms of diversification, professional management and affordability.
Some of the benefits offered by mutual funds:
Therefore we discussed here mutual fund definition, benefits, types and a complete guide about mutual funds. Hence no investment is risk-free; when investors take risk they get higher returns and sometimes loses also. So you just have to choose the right mutual fund to invest in. The government agencies such as securities and exchange board of India and the association of mutual funds in India supervise and regulate mutual funds in India.
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