Mutual fund is the globally proven investment process. It slowly but steadily helps to grow money with the magic of compounding. To be a successful investor requires the clear goal, common sense, discipline of the timely investment, and the clear-cut understanding of the basic concepts of market and its mood. Before start putting money into the mutual funds, Lets see what are the different types of mutual funds exist. We’ll have a quick look at some most common and well established known mutual funds.
Equity Funds: Equity fund targets to the equity market. Equity funds are invested into the stocks. These funds are known as the aggressive type of funds which helps to grow money fast upon the raise of the market. Risk factor is equally high in equity funds. Equity funds comes with the multiple sub categories including the large cap market, small cap market, mid cap market. Investor can invest into any of one or can have combination of these funds to have diversified portfolio.
Index Funds: Index funds costs are lower as these funds valuation reflects as per the index movements. These funds are mainly focused on the indexes like S&P, Dow Jones. As the value of the index goes up mutual fund value raised and vice versa. These fund costs are very less as there’s not much work left like research, analysis of the market for the fund manager. As Index fund value will go up or down as index moves.
Fixed Income Funds: As the name suggest these funds gives the fixed rate of return on the investment. These funds give the fixed rate of interests which are usually either the government bonds or the corporate bonds.
Money Market Funds: These funds return the minimum return as compare to other types of mutual funds. These funds invest in the short-term fixed return securities including the commercial papers, treasury bills etc.
Specialty funds: These funds are invested into the commodity market, real estates. These are the sector specific funds.
Fund of Funds: These funds invested into other mutual fund hence it is called as fund of funds.
Balanced Funds: Balanced funds are the best way to manage the portfolio. Investor invests money into the balanced funds which includes the equity funds as well as the fixed return funds. Balanced funds manage both the risk of potential lose in equity funds similarly it aims to return the fixed rate of return to the investor.