Mutual Fund

 Mutual Funds

A mutual fund is a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. An Asset Management Company (AMC) pools money from investors and invests it in portfolio on behalf of investors. The money pooled is “mutual fund” which is invested in various asset classes like equity, debenture, commercial paper and government securities. An Mutual Fund managers responsible for investing pooled money into specific securities. The team tracks and researches different financial instruments and manages the fund. Mutual funds are set up to buy many stocks. Mutual funds are regulated with SEBI(Stock Exchange Board of India) and are highly regulated. Investors are assured about a trusted monitoring of their money.

Different Types of Mutual Funds

1.Equity Fund(EF) – It invests a major part of shares. The returns are directly linked to the performance of the stock market. An equity fund carries comparatively higher risk.

2. Diversified fund – It invest in companies that is spread across sectors. If one sector doesn’t do well then another sector would bail the fund out.

3. Sector fund – It is invested mainly in equity shares of the company in a particular business sector or industry.

4.Index fund – It replicates the portfolio of particular bench mark index. The value of Index fund varies in proportion to the bench mark index.

5. Debt or Income fund – It is invested in instruments like bonds, debentures, government securities, commercial paper. The fund aims to provide a regular and steady income to investor.

6. Liquid fund or money market fund – It aims at providing easy liquidity , safety of capital and gives returns. It is invested in highly liquid short term instruments like commercial paper and treasury bills. The period of investment could be short.

7. Balanced fund – It is invested in both equity shares and fixed income bearing instruments in some proportion. It provide safety and steadiness of debt market, capitalizing on high returns earned from equity markets.