A mutual fund is a portfolio, or collection, of individual securities (some combination of stocks, bonds, or money market instruments) managed according to a specific objective spelled out in the fund’s prospectus. A mutual fund allows investors to pool their money, then the fund invests it on their behalf.
Mutual funds in general can hold many different investments, offering a level of diversification often only achieved with larger portfolios. Because mutual funds invest in a variety of equities, bonds and other holdings, investors can create a balanced and diversified investment portfolio with a relatively modest amount of money.
Most popular Mutual Funds are:
Equity – It could be a high-risk investment in the short term, however investors can expect capital appreciation in the long run.
Debt – Major part of the investable fund lies in debentures, government securities, and other debt instruments.This is a relatively low risk-low return investment avenue which is ideal for investors seeing a steady income.
Liquid – This is ideal for investors looking to utilize their surplus funds in short term instruments.
ELSS/Tax Saving – As the name suggests, this scheme offers tax benefits to its investors. The funds are invested in equities thereby offering long-term growth opportunities. They have a 3-year lock-in period.
Balanced – This scheme allows investors to enjoy benefits of equity and debt at the same time. These are ideal for the cautiously aggressive investors.
Closed-Ended – A close ended scheme has a pre defined maturity period and investors can invest only during the initial launch period. To name few, New Fund offers(NFOs), Capital Protection Funds, Fixed Maturity Plans(FMPs)
One can choose to invest in mutual funds as it offers Diversification, Liquidity and Professional Management. The selection criterion should be based on Time horizon and Risk Appetite.
Mutual Fund Investments are subject to market risks. Please read the Statement of Additional Information (SAI) and Scheme Information Document (SID) carefully before investing.