All of us wish to be financially free. Investment into stock market is one of the best ways to fulfill our wish. But, lots of people have not sufficient time for research which is required to find a good stock to invest. For such people Mutual Funds are the best options to invest in stocks.
A mutual fund is an instrument which is managed by a fund manager who invests your money in stocks. These managers who take care of your money, are experts. Thus, you get a chance to earn good profit on your investments without spending even a second on researching stocks.
Mutual funds are now many types. Let’s see-
Types of mutual funds (On the basis of period of investment)- On this basis, there are three types of mutual funds-
I.Open Ended Funds- An open ended mutual fund scheme is that one which allows you to book profit any time you want.
II.Closed Ended Funds- A closed ended mutual fund scheme is that one which locks your money for a period of time.You can’t withdraw money within the period.
III.Interval funds- A fund that has the qualities of both open and closed ended funds is called an interval fund.
Types of mutual funds(On the basis of the nature of investment)-
I.Money Market/Liquid Funds- In such funds your capital is invested in government bonds, treasury bills etc to keep your money safe.
II.Equity/Growth Funds- These funds invest your money in stocks to pay you higher returns.If someone chooses a good equity fund for a long period of time, he/she may get great returns.
III.Income/Debt Funds- Such funds have been designed for those people who like fixed return instruments. These funds invest your money in some government and corporate bonds that pay fixed return.
IV.Balanced Funds-As the name suggests, these funds invest in both equities and fixed income instruments to give you constant return as far as possible.
V.Fixed Income Funds-The objective of these funds is to give you fixed return by investing in different government or corporate bonds like Income or Debt funds.
VI.Index Funds-There are several indexes in a stock market like S&P 500, The Nasdaq Composite Index, S&P BSE Sensex, NSE 50, S&P BSE Smallcap etc. These indexes also haven good returns with time. Index funds invest your capital in these indexes.
VII.Specialty Funds-People who want to invest in real estates.Specialty funds give them opportunity to do the same through mutual funds.
VIII.Fund of funds-Some funds also give you the benefits of other funds. These funds invest your mioney in multiple mutual funds.