Mutual Funds
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Types Of Mutual Funds
Your Journey Toward Financial Goals Begins Here With Trust
Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of assets, such as stocks, bonds, and money market instruments. They are managed by professional fund managers, who make investment decisions based on the fund’s objectives.
Diversification: Reduces risk by investing in multiple assets.
Professional Management: Fund managers handle investment decisions.
Liquidity: Investors can buy or sell mutual fund units easily.
Net Asset Value (NAV): The price of each mutual fund unit, calculated daily.
Tax Benefits: Some mutual funds offer tax-saving advantages.
An equity scheme is an open-ended mutual fund that invests the majority of its investible corpus in stocks. Equity funds can be further categorized based on market cap, sectoral / thematic, and tax saving. These funds are known to have a high risk-returns tradeoff and may offer sizeable capital appreciation in the long run.
A debt fund is a mutual fund that invests in fixed income securities and other debt related instruments. Of its total assets, a debt fund may invest a minimum of 65% to 80% in bonds, corporate securities, treasury bills, commercial papers, etc. The investment objective of a debt fund is to offer regular income while protecting the investor’s capital.
A hybrid fund is a mutual fund scheme that spreads its assets across equity and debt. Also referred to as balanced funds, the fund manager of hybrid funds allocates assets to both equity and debt instruments depending on the investment objective and allocation strategy. Hybrid funds can be further categorized as equity oriented and debt oriented. Equity oriented hybrid funds predominantly invest in equity whereas debt-oriented hybrid funds predominantly invest in debt and debt related instruments.
Index funds are passively managed mutual funds that aim to replicate the performance of a specific market index, such as the Nifty 50 or S&P 500. Instead of actively selecting stocks, these funds invest in the same securities as the index they track, maintaining the same proportions.
Tax-saving funds, also known as Equity Linked Savings Schemes (ELSS), are mutual funds that offer tax benefits under Section 80C of the Income Tax Act. They primarily invest in equity shares and provide long-term capital appreciation along with tax savings.
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