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Types of Mutual Funds and their Works- Beginners Guide

Types of Mutual Fund


Basic terms in Mutual Funds investment

Hello In today's post I would like to educate about mutual funds. What are the mutual funds and how to invest them basically all you need to know? As a common man or a beginner, you will get all types of information.



Friend every month when you credit your salary you save for emergency and future purpose or you want to buy a house, a car that why saves up to.
So what would be the type of saving very obvious is you save your money in your savings account. 

It is very worst because money loses value every year inflation is increasing all the thing price increases so the value of your money decreases every year. They invest their money because of inflation.


There are different places to invest in. Our country has mainly 4 places for investments.
  • Saving Account
  • FD (Fixed Deposit)
  • Gold & Jewelry
  • Real Estate


Every Investment has 3 things, Return, Return, and Risk Time.

Return

Return means how much percent of profit you are earning through the investments this is normally seen in percentage. If our inflation rate is 4% then you should see that your profit return is more than at least 4%.
Otherwise, there is no point of investments if you have put your money and the value didn’t increase, because the inflation rate is also increasing.

Risk

Risk means how risky it is to invest, what is the chance of losing all your money in those investments. What is the chance of going in loss after investing there?

Time

Time means for how long you are investing. So the basic rule here is that if time is more, the risk is more then return will also be more. If you want more return percentage on your investments they you will have to take more risk and should invest for a long period.

Which type of investments is best



Saving accounts have the minimum risk and there is no restriction too. You can save or take money out at any time.

But the return we get here is also very less, only 4% whereas our inflation rate in the last few years has been 4-5%.

Fixed Deposit is also a less risky option but it has a time limit before that we can’t take the money out. Hence the return is also a bit more somewhat 7-8%.

Gold and Jewelers these days have a significant risk, this price fluctuates a lot if you are going to see this history they you will know that until 2012 the process consistently increased if you would get a good return.

But after 2012 there have been a lot of ups and down but they have maintained a level. Hence there’s not a much profit.

Investment in the properties and real estate investments has low to moderate risk. You can see India’s housing prices in the last few years. It has come up and down a lot.

One of the disadvantages of investing in housing is that it needs a lot of capital. You need to have lacs and crores rupees to invest in.

You might have heard about stock market friends, you can get a lot of returns here but also loss. The risk of investing in the stock market depends on the stock where you are investing.

You need to have a good knowledge of the performances of the stock and how the stock market does work’s basically. If you Don’t know you shouldn’t be investing here.

So these are a few main types of investments that I have told you there are some other types too.

A general well knew advice is that friends you should never invest your money only in one place. You should invest in different places so that if there’s any crash then you will not have to bear the overall loss. It very fewer chances of everything crashing together. This is called diversification.

What are Mutual Funds

A mutual fund is a special kind of investment through which you can invest in different types together you can do diversify investments by investing in one place. Asset Management The company starts mutual funds.

Basically, you give you money to Asset Management Company and many people like you do so that the company invests all money collectively at different palaces. They have appointed experts and with their suggestion, they invest the money at different places and the return rates they get collectively from these different places, and a small percent of 1-2% is kept a profit by the Asset company and the rest you get back as per that return that.

HDFC, HSBC, ICICI, ADITYA BIRLA, RELIANCE, TATA, these are few examples of companies and banks who have started their own asset management company.

All companies start different kinds of mutual funds in large numbers.
So how risky is your mutual funds and what is the return depends on the mutual funds that you are investing in, a mutual fund can give the return rate of 4% ad also of high risk to. Because all this depends on where the asset management company is investing your money if that company is investing in stock then it will be more returns and if it’s investing in the government bonds then it will be less risky.

Types of Mutual Funds

There are three types of mutual funds, you can invest in.
  • Equity Fund
  • Debt Fund
  • Hybrid Fund
What is Equity Fund

Equity fund in which you directly apply in the stock market through mutual funds.

An equity fund is mutual funds which invest the majority in equity stocks of the company. I equity funds are considered to be risky but they tend to give higher returns in the long term.

So they are risky as well as because you’re directly applying in the stock market but it gives you excellent return as well.

So there are eight equity funds you can invest.

   Large-cap mutual funds

   Mid-cap mutual funds 

   Small-cap mutual funds

   Sector mutual fund 

   Multi cap mutual fund 

   Dividend yield mutual fund

   ELSS mutual fund 

   Sectoral /Thematic mutual fund


  What is Debt mutual fund

Debt funds which are the safe fund In which you got a fixed rate of investment.

Debt mutual fund is funds that usually invest in government securities, corporate bonds, etc. The debt fund is more stable and less volatile to the market conditions. Debt funds are less risky than equity fund and the returns are also less.

So if you are not ready to take more risk than you should also compromise on the returns as well.

What is Hybrid Mutual fund

So if you are a beginner and first time applying for a mutual fund. so it is a good option to invest in the hybrid fund.

Hybrid funds are mutual funds or exchange-traded find (ETFs) that invest in more than one type of investment security. such as stocks and bonds.

This makes hybrid funds outstanding for stand-alone options, good funds for beginners, or crore holding in a complete portfolio of mutual funds.

 So this was all about types of mutual funds.

Conclusion

After knowing about all types of funds I will easy to decide that what is the best mutual fund In my way as a beginner the hybrid or best fund is the best mutual fund.

Note:- Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.


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