Investment in Mutual Fund

A mutual fund is a professionally managed trust that pools the savings of many investors and invest in stocks, bonds, short-term money market instruments and commodities such as precious metals. Investors have a common financial goal to invest in mutual fund and their money is invested in different assets according to the mutual fund objective. Mutual fund provides advantage of professional management to the retail investors.

A mutual fund company collects money from investors and invests it in various securities like Stocks, Bonds and other market instruments. Mutual fund is managed by professionals who understand the market very well and try to accomplish growth by making strategic investments. Investors get units of the mutual fund according to the amount they have invested. The Asset Management Company is responsible for managing the investments for the various schemes operated by the mutual fund. 

Types of Mutual Fund-

Open-ended Fund

An open-ended fund is a fund which is available for subscription and can be redeemed throughout the year and investors can buy and sell units at NAV related prices. These funds do not have a fixed maturity date. The key feature of an open-ended fund is liquidity.

Close-ended Fund

A close-ended fund is a fund which has a defined maturity period like 3-6 years. These funds are open for subscription for a specified period at the time of opening of fund. These funds are listed on a recognized stock exchange.

Equity/Growth Funds

Equity funds invest a major part of its corpus in stock market and the investment objective of these funds is long-term capital growth. Equity funds invest minimum 65% of its corpus in equity and equity related securities. These types of funds are suitable for investors with a long-term outlook and high risk.

Debt/Income Funds

Debt/ Income funds invest in securities such as bonds, corporate debentures, government securities and money market instruments. These funds invest minimum 65% of its corpus in fixed income securities. These funds provide low risk and stable income to investors.

Balanced Funds

Balanced funds invest in both equities and fixed income instruments. These funds provide both stability of returns and capital appreciation to investors. These funds with equal allocation to equities and fixed income securities are ideal for investors looking for a combination of income and moderate growth.

Money Market/ Liquid Funds
Money market/ Liquid funds invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit and Commercial Paper for a period of less than 91 days. The aim of Money Market /Liquid Funds is to provide easy liquidity, preservation of capital and moderate income.