Mutual Fund



According to Wikipediamutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corporations. Mutual fund investors may be retail or institutional in nature.

let's start with the types of mutual fund

 So here we will be referring to five major categories classification;-

1.Based on Structure.

  a.Open-Ended Fund

  b.Close-Ended Fund

  c.Interval Fund

2.Based  on Asset Class 

  a.Equity Fund 

  b.Debt Fund

  c.Hybrid Fund.

3.Based On Goals

  a.Tax Saving Fund

  b.Retirement Fund

  c.Growth Fund

  d.Fixed Income Fund

4.Based On Risk

  a.Low Risk

  b.Moderate Risk

  c.High Risk

5.Based on Specialty 

  a.Secor Fund

  b.Thematic Fund

  c.Fund of Fund.

So we will be learning in brief about all these types of the mutual fund now this becomes important that as an investor you must be aware of these particular mutual fund features because whenever you are going to invest in any mutual fund you know that it is subject to risk because it is linked to investment in market securities now you need to consider your risk appetite your investment objective and you must be aware of all the types of mutual funds so that you can choose the best one as per your need as per your investment goal.

1. Based on Structure



a.Open-ended Fund

These types of schemes are manly open for investors to enter or exit at any time whenever they want even after NFO.In another word you can say open-ended fund for there for you to do subscribe or redemption whenever you want. subscription is whenever you are purchasing any mutual fund scheme redemption is whenever you are selling any mutual fund scheme so the open-ended fund is always open for your subscription or redemption to any mutual fund scheme now these schemes are open even after NFO  it means that info is new fund offer whenever AMC which is an asset management company which can beany bank or financial institution whenever they launch any new mutual fund scheme that is available for investors for a subscription that is that time period is called new fund offer period. so, therefore, that time period is like a new mutual fund scheme available for you to invest but after that period is over even after that if you want to invest again in that scheme then you can invest you can enter or you might want to exit from that particular scheme at any time it all depends on your own opinion. so those schemes will be referred to as open-ended fund although some unitholders may exit from the open end scheme wholly or partially the scheme continues operations with the remaining investors so one particular mutual fund scheme will be having many investors, so all those investors might or might not be invested in that particular mutual fund scheme in order to gain profit. if someone who had invested in a mutual fund wants to exchange their mutual fund scheme then he/she have to sell their mutual fund schemes even after that mutual fund's teams will continue. while talking about the time frame of a mutual fund when it is  to be closed so the answer is it does not have any kind of time frame to be closed

b.Close-Ended Fund 

Now when you learn about the closed-ended fund then you would more clear about what's the difference between open-ended and closed-ended funds. simply,closed-ended funds are those types of funds that have a fixed maturity of investor that can buy of closed-end mutual fund scheme from the fund only during its NFO. As an open-ended fund, we saw that even after NFO the scheme was open for investors to purchase or sell the mutual fund units but in the close-ended fund. it is not available after NFO .so it is only during the  NFO we learned about new fund offer and whenever a new scheme is introduced in the market then it can be bought or sold. scheme but after that these closed-end schemes become close and it is listed on the stock exchange. so if you are an investor in a close-ended fund and you want to go for redemption you want to go for the subscription of any scheme. if you want to do a purchase or sell of the closed-end mutual fund then you need to visit your concerned stock exchange suppose if you are from the USA then you need to visit NYSE and Nasdaq. while talking about the availability of close-ended funds it will available at the NFO period that is the new fund offer period after that it becomes listed on the stock exchanges. after that, you will be trading as an investor you will be buying and selling if the investors will be available the trading investors will be available over there this can be done through the medium of listing of the scheme in one or more than one stock exchanges such as listing is compulsory for close-ended schemes. For a close-ended mutual fund, the listing is necessary to buy or sell from the stock exchange so scheme it becomes important to create a platform where trading could be done and this is the reason why it is after listing on the stock exchange now you may buy or sell closed-ended mutual form your concerned stock exchange.

 c.Interval Fund 

Interval funds can be defined as the combination of both open-end and closed-end mutual funds or we can say almost all time it seems like close-ended however at end of pre-specified duration the difference between 2 successive transition time which we called interval period. if you talking about the minimum duration of an interval period which is 15 days. in an interval fund there is no subscription and redemption permitted during the interval period. Now you might be clear they are a combination of both open and close-ended fund .so they are largely close-ended funds which mean that after NFO they are not available they are closed but they are open due for a special period so these are available after a specified time now the gap between two successive transaction period which is known as interval period so the gap between when the fund become closed and when it again opened for purchase and sale that gap that time period gap is called interval period and this interval period minimum duration should be 15 days .until 15 days it will be close but it can be more than that now during the interval period during the period when it is closed the subscription and redemption is not permitted. which means you are not allowed to buy or sell mutual funds during that time period. when it will again become open end when these time of funds can be sold at the specified time period so we can buy new scheme.so, interval funds that will behave contain the feature of both open & close-ended funds.

2.On The Basis Of Asset Class



a.Equity Fund

An equity fund is such type of fund that invests in equity and equity-related instruments which mean those mutual fund schemes which are riskier are investing in equity and equity-related instruments in maximum numbers. in these funds, 65% of your investment is used for equity. now some examples are small-cap mid-cap and large-cap equity funds where investment is done in the investment of the company on the basis of the market Capitalization (CAP). when you know about small market capitalize fund middle-market capitalize fund or large-cap funds. these are funds investing in those companies which are having their market capital which is having small market capitalization medium and large market capitalization and to give you a brief about market cap it shows the value of the company that is traded which means that it is calculated by multiplying a total number of shares by the price of each share .having larger-cap means all most all people are interested to invest in that company .they supposed it would be beneficial for them because in equity funds they are taking risk the expectation of investors become high means to expect higher return as compared to other funds.

 b.Debt Fund

Debt fund defined that invest in debt and debt-related instruments so the major proportion of the investment amount which will be more than 65 percent similar to equity fund this amount would be invested in debt and debt-related instruments however it is more secure and safer than equity fund because they are having fewer risk returns are also lower but as we as I told it these are safer instruments to invest now some of the debt schemes are liquid fund money market fund overnight fund short duration fund bond fund guilt fund etc giving you a brief about liquid funds and open-ended liquid scheme which invest in debt and money market securities with maturity up to 91 days than in the same way the overnight fund these schemes invest in overnight security which is having a maturity of one day and likewise guilt fund they invest majorly in government. you can say these funds are safer and for a short time duration.

c.Hybrid Fund

Hybrid Funds refer to the combination of both equity and debt fund which invest in both equity and debt instrument now there are some people who want to take an equal risk between them both so they would they don't want to go for higher risk and they don't want to compromise with lower returns. so here there will be an investment in proportion in both the asset classes now this can be further categorized as conservative balanced and aggressive hybrid fund so conservative hybrid where 40 to 35% in equity fund where the investment in both equity and debt will be almost equal about 40 to 60 percent and an aggressive hybrid fund where the investment in equity instruments will be on larger site so it will be about 65 to 70 percent and rest will be going in that instrument.

3.On The Basis of goals



 a.Tax Saving Fund

You can also invest in a mutual fund scheme as per your investment objectives so that you can invest in various kind of schemes. which provides with tax-saving option. you need to pay tax whenever you gain profit so mutual funds provide you with a tax-saving option. which means you don't need to pay a lot of tax for your income. that the reason behind the fact to provide tax saving schemes for the investors for their benefits. so mutual fund offers tax saving schemes which provide a tax benefit to the investors along with return now the investment made in tax saving mutual funds are eligible for tax benefits under section 80c of the income tax act so there are many tax-saving funds available which will provide you tax benefits which will be tax deduction under section etc of the income tax act and one such example of tax saving fund is less which is equity-linked savings scheme.

b.Retirement Fund 

It defined invest majorly in low-risk investment options like government securities to ensure stable and steady return now if you want to save your money for your retirement you want that you have invested your money over time and after retirement, you reap the benefits in form of pension from that particular fund so you can invest in retirement fund these mutual fund schemes invest in safer instruments like government securities so that your money is safe and there is no loss and you would be provided with a good average return to provide your pension after your retirement now investors invest money in retirement funds so that they can receive regular money as pension after retirement generally the retirement funds come with a lock-in period of about five years or tell you retirement age as per your choice.

c.Growth Fund

 Growth funds invest in a diversified portfolio consisting of stock of high growth companies the main objective of these funds is to provide capital appreciation thus sometimes they might or might not  provide dividend you so so growth funds will not be providing you any dividend or will be providing you very little dividend because most of the money is reinvested the major objective of growth fund is capital appreciation so to provide you as high a return as possible now these funds will thereby taking a higher risk and will be investing in a diversified portfolio consisting of stocks of high growth companies or companies which are new but are having high growth potential so these funds are high-risk instruments and thus the expectation of return is also high by the investors one such example is a blue-chip fund which invests in most of the growing companies most of the popular companies

 d.Fixed Income fund 

These funds invest in safe assets like bond debentures and money market instruments to provide regular cash flows at the defined interval to their investors in terms of interest and dividend. these are the funds that will be providing you regular cash flow. some people want to invest so that they can generate money at regular intervals of time. these will be fixed income funds they will be investing in short duration bonds debentures. money market instruments and will be providing their investors in the form of dividend or interest regular cash flows. the best example is the monthly income plan.

4.Based On Risk 



a.Low-Risk Fund

Now, this categorization is dependent on your risk appetite maybe you are an investor who is risk-averse it means that you don't want to take higher risk because you are fearful that your money will be lost and you can't take that much risk. you are having a family to care of and you can't and you you're not having so much of investable amount to lose and thus you will be going for the low-risk fund because these funds will be mostly investing in that instrument .this types of funds are debit related funds that might lower your risk in investment and will also be providing you a good average return of about six to seven percent now because you are taking the lower risk of obviously your money is safe and you are getting an average return which is generally low about six to seven percent but anyway your investment objective was to get an average return but to be on the safer side and to take the lower risk so examples of the low-risk fund are guilt fund as I already mentioned these funds invest in government securities then there is debt fund investing in debt instruments.  then there are money market funds that invest in money market instruments like call money certificate of deposit treasury bills etc.

b.Moderate Risk Fund

 these funds provide a balanced composition of investment in both equity and debt with moderate risk and return of about 8 to 10 percent so there are people I talked about the investors who are ready to take some amount of risk but are not ready to take a lot of losses and thus they will be going for moderate risk fund because these funds invest in a competition where there is a balance between both the equity and debt funds now this uh this because some amount is invested in equity instruments some amount is invested in debt instruments it provides a moderate return of about 8 to 10 percent .one of the best example of moderate risk fund is hybrid fund.

c.High-Risk Fund 

High-risk funds invest in equity and equity-related instruments as a result which has got a high chance of success or failure. in another term we can say it has got high amount of risk in your investments instruments you should invest for a good time period so that should be around 5 to 10 years because that time period will be required to go through all the market fluctuations and thereby give you a good return because market fluctuations in short not you may not be able to gain high gain in the market may be down or it may be uh it may be going up and again it may come down so it the market fluctuates but over a period of time it will grow and it will provide you a good return so it's always advisable to invest for the longer period of time when you are investing in high-risk fund equity fund.

5.Based On Speciality



a.Sector Fund

Sector Fund is just like an equity scheme investing fund in which sector fund invests in one septic sector. let us take an example,in sector fund you will invest in only one sector suppose your sector is bank .in some time your investment might return you high profit or some time huge loss that all is depend on market fluctuation or market trend. so these funds will be investing in one particular sector so if you want if you as an investor you see that the banking sector is performing really well so you want to invest in sector fund which will be investing in banking sector so this fund choose only one sector as their investment so they will be investing in that sector only now these sector funds are that's riskier because if that particular sector in which investment is done does not perform well loss.

 b.Thematic Fund

An open-ended equity scheme investing in line with an investment team so these mutual funds will be investing according to theme these funds invest across multiple sectors that are woven around a common theme so the thematic fund is generally confused with sector fund but it is concerned with a various sector like banking, hydropower, investment, infrastructure, hotel, however, sector fund invests only in one sector as a result which will be related to that particular theme of that particular mutual fund scheme. so, The best example for Thematic Fund is the stock market into infrastructure construction cement steel telecom power, etc so the theme of that mutual fund scheme was infrastructure now that according to that theme the mutual fund scheme will be investing in shares of com all those companies which are somehow linked to infrastructure business so it will be constructed the cement the steel the telecom all that is linked to infrastructure.

c.Fund Of Funds 

an open-ended fund of fund scheme investing in an underlying fund so in simpler terms these are those mutual fund scheme which will be investing in another mutual fund scheme so one fund investing in another fund will be referred to as a fund of funds the minimum investment in the underlying fund shall be 95 percent of total assets which is quite a large amount.

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