In other words, mutual funds are investment options where finance is pooled in from several investors by an Asset Management Company and is invested in debts, securities, equity and money markets. After deductions by the Asset Management Company, the resulting gains are divided among the investors as per their portfolios. The Association of Mutual Funds in India (AMFI) regulates mutual funds.
What are the types of mutual funds?
- Money Market Funds: They invest in short-term fixed securities such as banker’s acceptances, treasury bills, and government bonds, etc.
- Fixed Income Funds: They pay a fixed rate of returns like government bonds, corporate bonds, etc. They aim to have money coming regularly into the fund.
- Equity Funds: They invest in stocks and their aim is to grow quicker than money market funds or fixed income funds.
- Balanced Funds: They invest in a mix of equities and fixed income securities and try to balance the aim of achieving higher returns against the risk of losing money.
Sridhar asks “Why mutual funds?” The answer is below.
- The right amount of diversification: You can diversify your investments across assets.
- Flexible: You have options to pick any type of funds and bundle them up into a single package.
- Experienced Managers: Managers are professional and have years of experience handling different types of assets. You will be provided their detailed profiles.
- Accessibility: You have a centralized database which provides you all information and highlights what is best for you.
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