Various types of Mutual Fund schemes exist to meet the needs of various people. There are three kinds of mutual funds.

Equity or Growth Funds

• They invest mostly in equity, i.e. Shares of companies
• The most important goal is the creation of wealth or capital appreciation.
• They can earn higher returns, and are suitable for long-term investments.
• These are just some examples.
  • Funds with a large capital that invests primarily in established companies
  • ” Mid Cap Funds” which invest in mid-sized businesses. funds that invest in mid-sized firms.
  • “Small Cap” funds that invest in smaller-sized businesses
  • Multi-cap funds invest in large, medium and small-sized companies.
  • Funds referred to as “Sector” that invest in businesses that are closely linked to a certain kind of business. For instance. Technology funds that invest in technology companies
  • Funds which are “thematic” and invest in a single topic. For e.g. Infrastructure funds, for example, invest in companies that benefit from growth in the field of infrastructure
  • Fonds for Tax-Saving

Income or Bond or Fixed Income Funds

• They invest in Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.
• They are safer investment options and are ideal for Income Generating.
• Examples would be Liquid Funds and Short-Term and Floating Rates, Dynamic Bond, Gilt Funds, etc.

Hybrid Funds

• These investments are in Equities as well as Fixed Income, thus offering the best of both: potential for growth and Income Generating.
• Examples include Aggressive Balanced Funds and conservative Balanced Funds and Pension Plans Children Plans and Monthly Income Plans and many other plans.

How can Mutual Funds help manage risk?

The risk of a loss can be seen in various types. If you are a shareholder in a company, for example, there are a market risk, price risk, or even a specific company risk. The share of just that company could drop or be wiped out due to any one of the above reasons or a combination of these reasons. You van visit Mutual Funds Service online.

The Mutual Fund portfolio typically holds many securities. This lets you enjoy ” diversification“. In reality, diversification is one of the main advantages of investing in the Mutual Fund. It guarantees that a drop in the value of some or even a few securities will not impact portfolio performance significantly.

Another risk worth keeping in mind is Liquidity Risk. What exactly is liquidity? It’s the ease of converting funds into cash. Imagine an investor who has an investment that is 10 years old and will require cash in the next 3 years. This could be a typical liquidity issue. The main concern at present is cash availability and not returns. Mutual Funds , in accordance with regulation and form, provide incredible liquidity. They are designed to provide investors with an ease of investing and redemption.

Also read: Importance of Positioning