What is Mutual Fund & Different Types of Mutual Funds in India?

Mutual funds are always considered as a great way to invest. No matter how much money you want to invest in the mutual funds, you can be assured of getting your money invested to a safer place with a higher ROI which is literally not possible if you are using any traditional way of investment. And although the mutual funds come under the market risks, but still the rate of interest is higher than the traditional ways of investments, and the schemes that are initiated by the banks and other private firms where they provide you a fixed amount ROI for your invested money.

What is Mutual Fund?

Formally, the mutual funds can be defined as the pool of money accumulated by numerous investors who are looking invest their money in a secure place that provides better returns. The corpus of this money is invested in different assets like debt funds, liquid funds,and others. The amount gained or lost is equally distributed among the investors according to their shares in the total investment. In all, if you were looking forward for an investment that can provide you a good amount of returns, then you can rely on the mutual funds that have good reviews and ROI in the past few years.

Different Types of Mutual Funds in India

However, before investing in the mutual funds, it is essential to know about the different types of mutual funds that you can opt for as an investor. So, read further for the in-depth information about the numerous types of mutual funds available in the Indian market that you can opt to get a good amount of returns.

The mutual funds in India are broadly classified into numerous categories in accordance to the type of returns the investor is looking for, and how much risk he can take to gain the amount after the maturity period. The most common fields in which the mutual funds in India can be divided are

Different Types of Mutual Funds 

Mutual Funds based on the structure

On the basis of structure, the mutual funds can be further classified into three categories namely, open-ended funds, close-ended funds, and Interval funds. Let’s have a deeper look at all of them

  • Open-Ended Funds

Open-Ended Funds are those funds that are open purchase and redemption throughout the year. In other words, you can keep your money invested in these funds as long as possible. Also, there is no upper or lower limit to invest. You can invest as low and as high as per needs and financial conditions.

In all, the open-ended funds are one of the most popular funds to invest money in. And if you are looking for a long-term investment that provides a decent ROI, then the open-ended funds will be the perfect choice for you. Moreover, in case you need money for some emergency, or are willing to invest that amount in some other funds, you can easily withdraw the money wherever you want.

  • Close-Ended Funds

Unlike the open-ended funds, the close-ended funds can only be purchased during the initial offer period. Also, the fund units have a specific maturity period. As these funds have strict buying and selling conditions, the required liquidity is provided by listing them on the stock exchange for trade. In other words, these funds can be sold back to the mutual funds, and if you are looking to sell them, then you need to sell them through the stock market at their usual prices.

These funds are perfect for those investors who are looking to buy a fund with a maturity date and that provides better ROI than the open-ended funds.So, if you were looking for the same, then search for the perfect close-ended funds

  • Interval Funds

Interval Funds are for those investors who love to have the benefits of both open-ended and close-ended funds but are not willing to face the risks of both the funds. The interval funds are opened for the repurchase of shares at different intervals during the fund tenure. The fund management company allows the investors to repurchase the funds from the other investors during the said intervals.

So, if you are looking for the benefits of both open and close-ended funds, then you should think of investing in the interval funds that are far easier to deal with than the open and close-ended fund.

Mutual Funds based on Asset class

On the basis of the asset class, the mutual funds can be further divided into the following categories

  • Equity Funds

Equity funds are those funds that invest in the equity stocks or shares of different companies. Although they have higher risks, but if you were looking for the better returns, then the equity funds are the best funds that you can opt for. Apart from the shares in companies, the equity funds also deal with the specialty funds like infrastructure and other fast moving consumer goods and banking sectors.

  • Debt Funds

Debt funds deal with government bonds, fixed income assets, and other debt instruments. These are the safest asset funds as they provide the fixed returns that are not possible or are extremely difficult to achieve while dealing with other asset class mutual funds.

  • Money Market Funds

These funds fall under liquid funds and deals with similar instruments like CP, T-Bills,and others. These are for those investors who want immediate returns. And although it does not provide the high returns, but they are perfect options for those who are looking for a safer option to invest their money.

Other categories and types of mutual funds that are popular in India are listed as follows

  • Index Funds
  • Balance Funds
  • Income Funds
  • Fund of funds
  • Specialty finds

In all, if you were looking for a good investment scheme and are looking for great results, then investing money in the appropriate mutual funds can be the best way to do that.

This was the brief information for those investors who are looking to invest some money to the mutual funds but are aware of what the mutual funds actually are, and what are the different types of mutual funds in India that they can invest their money on.

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