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Concept & Role Of Mutual Funds

Beginner Guide To learn Mutual Funds

Categories Of Mutual Funds - Equity

Equity Mutual Funds – Many People Face the same. what are equity funds? specific information about these funds are not available everywhere so that’s why we put together this article on stock funds. The equity fund is a mutual fund that invest only in equities/company shares. these are also called growth funds. stock funds are more popular of these three funds.

what is equity mutual funds and what are the benefits it brings?

most investment in equity funds are used to invest in stock market. these mutual funds are beneficial to investors willing to take risk in the stock market. the more profits the stock fund makes, the greater the risk. equity funds are used to invest in things like stocks on the secondary market. equity funds offer high returns at high risk. most equity funds invest based on the company’s market capitalization. simply put, a fund that invests in the stock market is called an equity fund. most people invest in these to make more profit in less time.

  1. large-cap equity funds – large capitalization fund tends to invest only in large companies . these companies are well established in their field, making new or small-cap companies less likely to go bankrupt. for this reason only, large-cap funds are considered suitable for such equity investors who don’t like to take more risks even in equity funds. such funds provide moderate returns with low risks.
  2. mid-cap equity funds – mid cap equity funds tend to invest only in medium sized companies. Investing in these companies involves a certain amount of risk. The company may not reach its full potential, and you have to lose your money. But you too can benefit from investing in such funds. When the investee company evolves and become a large company, so you can get a lot of benefits and it will be very beneficial for you as well. people who can take higher risks invest in such equity funds
  3. Small-cap equity funds – A Mutual fund system where most of the funds are invested only in stocks / shares of small companies. This type of mutual fund is known as a small-cap equity fund. The administrator of such systems invest most or all of their funds in small businesses. Because of this, investing in such programs is much riskier than mid and large-cap funds. But the returns of small cap funds are many times greater than those or large and mid – cap programs . Investing in these companies is also risky as little information is publicly available about them. Small-cap equity funds are intended only for investors with high-risk appetite.
  4. Sector funds – A sector fund means investing in a specific sector. These funds invest only in stocks of companies in specific industries, sector funds are considered very risky in the fund world because investments in sector funds are concentrated in one sector, because there is no trust in such funds. If you want to invest, invest only a small portion of your capital in these funds. 
  5. ELSS – Equity Linked Saving Scheme or Tax Saving Funds Equity linked saving plans, or tax saving mutual funds, are one way investors, can take advantage of income tax exemptions. Tax exemption is regulated under section 80 C of income tax act. Investment in these funds are tax deductible up to a maximum of Rs. 1.5 lakh. These funds have a three year wasting period. A lockup period means that these funds cannot be withdrawn after this period has passed.
  6. diversified equity fund  – These equity funds invest in all sectors. This means that these funds don’t just invest in specific types of stocks; they have a wide range of investment opportunities. These funds invest in companies in various sector and industries, simply put, such investment are not limited to investing in any particular part of the economy. 

How to invest in equity fund ?

investing in stock mutual fund is very easy, you can invest through a broker or agent, or you can invest online yourself. If you are new to the market, you should invest with the help of a broker. Because Brokers gives us all the information about it. The direct investment allows you to buy and sell funds freely. Not having a broker also saves you extra money to pay a broker. You can also use it to buy funds if you want.

Top equity Funds To Invest

  1. navi nifty
  2. hdfc index
  3. ICICI prudential
  4. quant tax
  5. parag parikh

investing in these funds can yield good returns. to make a successful investment, you should do a lot of research before investing in a company and have a thorough knowledge of the company’s financial situation. and when you are satisfied, invest only in stock funds.

Categories of mutual funds - debt

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Debt Through Debt funds, we get a fixed amount in return. Through this, the company or the government borrows the money of the investors and pays a fixed rate of interest on it. Debt fund is an investment pool or exchange traded fund, that has core portfolio consisting primarily of fixed income investments. Debt fund can invest in short term or long term bonds, securitized products, money market instruments, or floating rate debt. On an average the fee ratios on debt funds are lower than equity funds as the total management costs are intrinsically lower. Debt funds, often referred to as a credit fund or fixed income funds, come under the fixed income asset class. These low risk vehicles have traditionally been sought by investors seeking to preserve capital or earn low-risk income distribution. Investors interested in debt fund options can choose between passive and active products. Debt funds are categorized as follows:

  1. Overnight funds : Invest in 1 day maturity papers. (Securities).
  2. liquid fund :  Invest in money market instruments maturing within 90 days Floating rate funds – invest in floating rate debt securities.
  3. ultra – short duration funds : Invest in debt securities maturing in 3-6 months. 
  4. low duration fund – Invest in securities maturing within 6-12 months.
  5. money market fund – Invests in money market instruments with maturity up to 1 year.
  6. short duration fund – Invest in securities of 1-3 year maturity. 
  7. medium duration fund – Invest in debt securities with 3-4 years maturity
  8. medium to long duration funds – Invest in debt securities with 3-4 years maturity.
  9. Long-Duration Fund – Invest in long maturity debt (over 7 years).
  10. corporate bond fund – Invest in corporate bonds. 
  11. banking & PSU funds – Invest in debt of banks, PSUS, PFIS 
  12. gilt funds – Invest in Government Bonds of varying maturities
  13. gilt fund with 10 years constant duration – Invest in G-secs with 10 year maturity.
  14. dynamic funds – Invest in Debt funds securities across maturities Credit risk funds – Invest in corporate bonds below highest ratings.

Categories of mutual funds - hybrid

Hybrid Hybrid Fund is a mutual fund scheme that invests in both equity and debt. In other words, there is only one fund that invests in multiple asset classes. If you want to take less risks in the market, then investing in hybrid funds is a better option for you. In these, along with less than the risk, the return is also more. Hybrid Funds categorized as follows:

  1. Equity oriented hybrid fund – The portfolios of these funds have a higher proportion of equities than liabilities. Fixed returns from debt investments offset variable risky returns from equity investments. However, the high equity component of the portfolio means that the fund’s total return is subject to stock market investments.
  2. conservative hybrid fund – The Conservative hybrid fund is a type of hybrid mutual fund. These funds invest the majority of their assets in bonds and bonds. Conservative hybrid mutual funds are characterized by approximately 75% to 90% of assets invested in bonds.
  3. Balanced hybrid fund – A balanced hybrid fund is a mutual fund that invests in a multiple asset classes according to the investment objectives of the system. H stocks, bonds and other asset classes. These funds invest in a mix of different asset classes to diversify their portfolios and minimize the associated risks.
  4. aggressive hybrid fund – Aggressive Hybrid Funds or equity oriented funds are hybrid investment funds that make more allocations to equities or equity-related securities. A hybrid aggressive fund should invest between 20% to 35% of its assets in bonds and money market instruments.
  5. dynamic asset allocation – Dynamic asset allocation is a portfolio diversification strategy that adjusts the mix of financial assets based on economic or stock market trends.
  6. multi asset allocation – a multi asset allocation fund is a hybrid fund that must invest at least 10 % in at least three asset classes. these funds typically have a mix of equities, debt and other asset classes such as gold and real estate.
  7. arbitrage fund – an arbitrage fund is an equity-focused hybrid fund that takes advantage of arbitrage opportunities in the market. this could be price discrepancies between two exchanges, different prices in the spot and future markets etc. a fund manager of an arbitrage fund buys and sells shares simultaneously and earns the difference between the sale price and the share of the purchase price