Mutual Funds are divided basically into 2 parts
1.
On the basis of Objective
2.
On the basis of flexibility
On the basis of Objective
Equity Funds /Growth Funds
Main objective is to invest in shares and give capital
appreciation to investors. This is again divided into 8 parts
·
Diversified
Funds
·
Sector
Specific l Funds
·
Index
Funds
·
Tax
Saving Funds
·
Debt/Income
Funds
·
Liquid
Funds/Money Market Funds
·
Gilt
Funds
·
Balanced
Funds
Diversified Fund –
The investors money is invested across various sector like
power ,FMCG,Retail etc . It is Risk Averse for the investor.
Sector Specific l
Funds –
Here the investor’s money is invested in only one sector
shares. Like only in FMCG.This type of funds are best for those who are bullish
on any specific sector.
Index Funds –
Index funds are generally invested in only in index such as
CNX 500.The money collected from investors only invested in those specific
index representing shares. For e.g. a Nifty index fund will invest only in the
Nifty 50 stocks. The objective of such funds is not to beat the market but to
give a return equivalent to the market returns.
Tax Saving Funds-
These mutual funds are basically for 80c investment purpose
for income tax rebate.
Debt/Income Funds-
These funds invest predominantly in high-rated
fixed-income-bearing instruments like bonds, debentures, government securities,
commercial paper and other money market instruments. They are best suited for
the medium to long-term investors who are averse to risk and seek capital
preservation. They provide a regular income to the investor.
Liquid Funds/Money
Market Funds-
These funds invest in highly liquid money market
instruments. The period of investment could be as short as a day. They provide
easy liquidity. They have emerged as an alternative for savings and short-term
fixed deposit accounts with comparatively higher returns. These funds are ideal
for corporate, Institutional investors and business houses that invest their
funds for very short periods.
Gilt Funds-
These funds invest in Central and State Government securities.
Since they are Government backed bonds they give a secured return and also
ensure safety of the principal amount. They are best suited for the medium to
long-term investors who are averse to risk.
Balanced Funds
These funds invest both in equity shares and
fixed-income-bearing instruments (debt) in some proportion. They provide a
steady return and reduce the volatility of the fund while providing some upside
for capital appreciation. They are ideal for medium to long-term investors who
arewilling to take moderate risks.
On the basis of flexibility
·
Open-ended
Funds
·
Close-ended
Funds
Open-ended Funds-
These funds do not have a fixed date of redemption.
Generally they are open for subscription and redemption throughout the year.
Their prices are linked to the daily net asset value (NAV). From the investors'
perspective, they are much more liquid than closed-ended funds.
Close-ended Funds-
These funds are open initially for entry during the Initial
Public Offering (IPO) and thereafter closed for entry as well as exit. These
funds have a fixed date of redemption. One of the characteristics of the close-ended
schemes is that they are generally traded at a discount to NAV; but the
discount narrows as maturity nears. These funds are open for subscription only
once and can be redeemed only on the fixed date of redemption. The units of these
funds are listed on stock exchanges (with certain exceptions), are tradable and
the subscribers to the fund would be able to exit from the fund at anytime
through the secondary market.
Woow, great buddy, nice to read this finance articles. A very informative and precise way to understand MF. Pls recommend some of MF in every section and pls pls pls write more atleast one in every week. Thanks a ton Dude....Papu
ReplyDeleteThanks Pappu :)
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