Mutual Funds | What are mutual funds

Mutual Funds

Mutual fund companies raise money from investors. They invest money in the shares or share market. Instead they also charge some amount to the investors. For those people who do not know much idea about investing in the stock market mutual funds are a good option for investment. Investors can choose their mutual fund schemes according to their financial goals.

Let’s assume you are an investor and you do not have any idea of stock and stock market, you will need help from a professional or specialist for what you should do, it is a mutual fund scheme.  In a mutual fund scheme collects money from investors and buys and sells shares together.

A mutual fund is a type of investment instrument where a large number of investors collect their money at the same time and these deposits constitute a mutual fund. After this, the investor invests this money in various financial instruments of the market. The investment or return of the funds imposed by the investors on this investment is determined. Investors funds are dived into equal parts, which are called units.

What is the Unit

When many investors invest in a  mutual fund together, the fund is divided into equal parts called unit.

Types of mutual funds

Various types of mutual funds are available to meet the different needs of the people broadly these are five types.

Equity fund :- Equity fund is a scheme wherein the company invests most of the money collected from investors into equity shares. These are high risk schemes, which can lead to losses to investors, this is because most of the money is trapped in the stock market. This type of scheme/fund is good for investors, who does not afraid to take risks.

Debt fund :-  These funds are invested in loans like government bonds, company debentures and fixed income assets, most corporate debt scheme, government schemes etc. This type of mutual fund is suitable for those investors who do not want to take any risk. There is almost guarantee of money back in it.

Balanced fund :- In the balance fund the company invests the money received from the investors into both equity and debt. Its purpose is to earn huge amount in the end. Clearly the company puts money in the stock market keeping in mind the ups and downs of the market so that they can be given returns to the investors by earning as much money as possible.

Money market mutual fund :- Money market mutual fund is also called a liquid fund. In this the company puts the money taken from the investors in a safe and short term scheme, such as certificate of deposit, treasury and commercial paper, etc. Such investments are of limited time.

Gilt fund :- Gilt funds are considered to be the safest investment. In this the company puts all the money taken from the investors into government schemes because the government is backed up in this, there is no danger of drowning money.

Benefits of mutual funds

You can see that an investor who can not make huge investments, has the facility of investing  in small units. Apart from this, the biggest benefit of mutual fund is that an investor who does not have much information about the stock market so they handover their investment in the hands of experts. These experts determine where, how and when to invest in the market.

Mutual funds invest in many ways. The most prominent bonds and stock markets are. Apart from this, you can invest in gold or any other commodities under mutual fund scheme. There are several types of  mutual funds which are known as their investment. The main ones are Debt Fund, Equity Fund and Balanced Fund. Balanced Funds are also called Hybrid Funds.

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