Mutual funds

As bank rates have fallen down gradually, nowadays investors wanted to try their hand in stock market more ;-) But a common investor is not informed and competent enough to understand the complexity of the stock market. This is where mutual funds come to the rescue. Mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Diversification is one of the key feature of mutual funds. it means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously.





Mutual Funds are broadly classified into three categories

• Equity Funds
• Debt Funds
• Balanced Funds

Equity mutual funds are also known as stock mutual funds. An Equity fund manger will invest on Equities or shares more commonly. it is further classified into

• Diversified Equity Funds (invests in wide variety of equities)
• Mid-Cap Funds (invests in Mid-cap companies)
• Sector Specific Funds (invests entirely in specific sector)
• Tax Savings Funds (ELSS) (avail tax benefits)

Debt funds ensure low risk and provide stable income to the investors. Minimum return is guaranteed at any cost. further classified into

• Gilt Funds (invests in several medium and long-term government securities)
• Income Funds(invest a major portion into various debt instruments)
• MIPs( get benefit of both equity and debt market)
• Short Term Plans(Meant for investors with an investment horizon of 3-6 months)
• Liquid Funds(minimal risk - meant for an investment horizon of 1day to 3 months)

Balanced funds invest in equity (shares) and debt (fixed income instruments). Usually, they put around 50% of their total investments in each..

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