4 TYPES OF MUTUAL FUNDS.

1 Why there are different types of mutual funds available?

   Mutual Funds seeks to organize money from all possible investors.  And every individual investor has different investment preferences. In order to achieve these preferences mutual funds, organize different schemes of money.

1 How mutual fund schemes works?

   When you invest money in a particular scheme your money is converted into ‘Units’ in the scheme. Whenever investor invest money mutual fund company issues new ‘units’ and allocate those units to that particular investors portfolio. Now units represent your extents of ownership in a mutual fund.

1  What is open-ended and close-ended fund?

Open-ended fund: In short in These are the funds open for investors to enter or exit from the fund at any time. These funds don’t have any fixed-maturity period.

Close-ended fund: Close-ended funds have a fixed period. Investors can buy units of a close-ended fund only during a specific period of time when the scheme is launched.

There are mainly 4 types of mutual funds.

1.Equity or growth-oriented schemes:

These funds invest in equities i.e. shares of companies. The aim of these funds is to provide appreciation over the medium to long-term. These schemes are considered as high-risk funds but also have a high return potential In long-term.

2.Debt/Income oriented Funds:

These funds invest in fixed income securities such as bonds, corporate debentures, government securities and money market instruments like Treasury Bills, Commercial paper etc. Risk is low when compared to Equity mutual funds and it provides regular steady income to investors. 

3.Hybrid Funds:

These funds invest in both equities as well as income securities i.e. Debt mutual funds, thus these funds provide both growth potential’s as well as fixed income.

4.Money market and Liquid funds:

These funds invest your money in safer short-term instruments such as commercial paper, treasury bills, certificate of deposits, government securities etc. You can park your money in this fund for short period of time without any risk.