What are Mutual Funds
Mutual funds perform different roles for the different constituents that participate in it. Their primary role is to assist investors in earning an income or building their wealth, by participating in the opportunities available in various securities and markets.
Mutual funds can structure a scheme for different kinds of investment objectives. Thus, the mutual fund structure, through its various schemes, makes it possible to tap a large corpus of money from diverse investors.
As a large investor, the mutual funds can keep a check on the operations of the investee company, and their corporate governance and ethical standards.
Mutual funds can also act as a market stabilizer, in countering large inflows or outflows from foreign investors. Mutual funds are therefore viewed as a key participant in the capital market of any economy.
Advantages of Mutual Funds for Investors
- Professional Management
- Affordable Portfolio Diversification
- Economies of Scale
- Liquidity
- Tax Deferral
- Tax benefits
- Convenient Options
- Investment Comfort
- Regulatory Comfort
- Systematic Approach to Investments
Types of Mutual Funds
Based on your goals and your investment horizon, Mutual Funds give you the option to invest your money across various asset classes like equity, debt, and gold. This allows you to diversify your investments and strive to reduce your portfolio risk...
The portfolio of a mutual fund scheme will be driven by the stated investment objective of the scheme. A scheme might have an investment portfolio invested largely in equity shares and equity-related investments like convertible debentures. The investment objective of such funds is to seek capital appreciation through investment in these growth assets. Such schemes are called equity schemes.
Schemes with an investment objective that limits them to investments in debt securities like Treasury Bills, Government Securities, Bonds, and Debentures are called debt funds.
Hybrid funds have an investment charter that provides for investment in both debt and equity. Some of them invest in gold along with either debt or equity or both.
Other funds, such as Gold funds, Real estate funds, Commodity funds and International funds, ETF, etc create portfolios that reflect their investment objectives.
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