After knowing the secret of creating wealth through investing let’s dive into types of Mutual Funds and benefits. You might also want to know the types of equity funds. Again, Mutual Funds are basically a fund which comprises of investors'(your) money, which is managed by a professional and experienced fund manager who knows how much, when and at what price should a share be bought or sold in the market.
Fund Manager does all this by on your behalf so that you don’t make mistakes or lose your money and time consequently helping you make millions!
There are seven common types of Mutual Funds viz. Equity Funds, Debt Funds, Balanced Funds, Money Market Funds, Index Funds, Fixed Income Funds, Speciality Funds and Fund-of-Funds. So there is a lot of variety to choose from. Read on
Money market funds
- Short-term fixed income securities
- Examples: government bonds, treasury bills, bankers’ acceptances, commercial paper and certificates of deposit.
- Safer investment
- Lower potential return than other types of mutual funds.
Fixed income funds
- Fixed rate of return
- Examples: government bonds, investment-grade corporate bonds and high-yield corporate bonds.
- Invests in stocks.
- Grows faster than money market or fixed income funds.
- Higher risk of losing money.
- A mix of equities and fixed income securities.
- Riskier than fixed income funds
- Less risky than pure equity funds.
- Tracks the performance of a specific index such as the BSE SENSEX or NSE Index.
- Lower expense ratio.
- Focuses on real estate, commodities or socially responsible investing.
- Invest in other funds.
- Similar to balanced funds, they try to make asset allocation and diversification easier for the investor.
Along with Mutual Funds Types, also look out for the following factors:
- Types of Mutual Funds (Open-ended, Close-ended)
- Riskometer (Low, Moderate, High)
- Risk Grade (Below Average, Average, Above Average)
- Fund age (Older Funds with good performance are better provided Fund Managers remains the same)
- Past Performance (It totally depends on the market and its phases)
- Expense Ratio (Lower the Expense Ratio, more the returns will be)
- Turnover (Funds with Turnover less than 50% are better)
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