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

Equity or Growth Funds

• They are primarily invested in equities i.e. Shares of companies
• The primary objective is the creation of wealth or capital appreciation.
• They can bring in higher returns and are best for long term investments.
• Examples could be
  • “Large Cap” funds which invest predominantly in companies that have large-scale established businesses
  • ” Mid Cap Funds” that invest in mid-sized companies. funds which invest in mid-sized companies
  • “Small Cap” funds that invest in small sized companies
  • Multi-cap funds invest in medium, large and small businesses.
  • “Sector” funds that invest in companies that are related to one type of business. For e.g. Technology funds invest in technology-related companies
  • Fonds that are “thematic” and are based on a single theme. For e.g. Infrastructure funds that invest into companies that will gain from the growing infrastructure segment
  • Money for Tax-Saving

Income or Bond or Fixed Income Funds

• These 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, and so on.
• These investments are safe and ideal for the generation of income..
• Examples include Examples include Funds Short-Term, Fixed Rate, Corporate Debt and Dynamic Bond.

Hybrid Funds

• They invest in both Equities and Fixed Income, thereby offering the best of both, Growth Potential as well as Income Generation.
• Examples are Aggressive Balanced Funds as well as Conservative Balanced Funds pension Plans and Child Plans and Monthly Income Plans such as.

How can mutual funds help reduce risk?

The risk of a loss can be seen in various different forms. If you have a share in a business, for instance, you could be facing a market risk, price risk, or company-specific risk. The share price of that company could fall or plummet due to any of these reasons, or any combination of these causes. You van visit Mutual Funds Service online.

A Mutual Fund portfolio typically holds various securities. This lets you enjoy ” diversification“. In reality, diversification is one of the major benefits of investing in a Mutual Fund. This ensures that portfolio performance will not be affected by a dip in the cost of one or less securities.

Another risk that is important to keep in your mind is Liquidity Risk. What exactly is liquidity? It’s the ease of converting assets into cash. Suppose an investor has an investment that is locked for, say, 10 years, and she wants to cash out in the 3 ^third year. This is a typical liquidity issue. In this moment her primary concern is cash access, not return. Mutual Funds , as per regulations and form, can provide enormous liquidity. Portfolios are designed to offer an investor ease of investment and the ability to redeem.

Also read: Importance of Positioning