The following article is an initiative of NSE and is intended to create awareness among the readers
It can be difficult to understand mutual fund terminology and jargons attached to it, especially when you’ve been an investor in traditional saving modes.
Now, an investor has more scope and a variety of options for investments, such as mutual funds and at present, there are various types of mutual funds in the market, tailor-made for specific needs. After all, you can’t just Google which is the best mutual fund and blindly invest in it.
You have to be careful with your investment choices, be aware about short-term, mid-term and long-term plans, and amount you want to invest.
For starters, there are largely three types of mutual funds. Here are the characteristics:
- Equity orGrowth Funds: As the name suggests, they invest in equities and have potential to generate higher return. They are considered best for long-term investment. You have large cap, mid cap and small cap funds. There is also a multi-cap fund that invests in a mix of large, mid and small sized companies. Under this, you have sector and thematic funds. You can save taxes also.
- Bond/Fixed Income Funds: They invest in securities such as debentures, bank certificates of deposits, government securities or bonds, commercial papers, treasury bills, and commercial paper. They are a safe bet. You can invest in liquid, short term, funds to generate wealth.
- Hybrid Funds: They are a mix of equity and fixed income funds. They are balanced and offer great wealth creation potential. Under this, you can invest in balanced funds, pension plans, monthly income plans, etc.
You can generate wealth by selecting of the options. Before investing, look for tax saving options too.