Mutual refers to a pool of money that has been collected from many investors. Asset management companies invest this pool in stocks, bonds, and other securities. Investors share the capital realized from these investments in proportion to how many units they have.
Types and types of mutual funds
There are many types of mutual funds, so you need to choose the one that best suits your needs. You can categorize mutual funds based on the following criteria.
- The scheme structure
- The asset class that the scheme invetss is
They can further be classified based on their schemen structure.
- Open ended schemes
Investors are always welcome to participate in this scheme. Units can be bought and sold on a continual basis.
- Closed-ended schemes
The lock-in period for this scheme is three to five years. Based on the scheme objective, the lock-in period can vary between 3 and 5 years.
They can further be classified based on the asset class that the scheme invests in.
- Equity Scheme
This scheme can be used to make long-term investments. This scheme can be diversified or focused on a single sector.
- Debt scheme
This scheme invests money market instruments, government bonds or corporate bonds as well as interest-bearing securities such as term deposits and money market instruments.
- Hybrid scheme
This scheme combines both equity and debt. The scheme may invest in stocks or bonds, depending on which securities it chooses.
A systematic investment plan (SIP), allows you to regularly invest a set amount of money into mutual funds. This amount is known as the SIP amount. To reach your financial goals, you should regularly invest the correct SIP amount. Sip mutual funds offer the advantage of being able to invest in a systematic way each month, so you don’t have to wait for market movements. You can reach your final large amount by investing small amounts regularly.
Financial advisor
It is crucial to choose the right mutual fund. The fund you choose should best suit your needs. Before you invest, consult a financial advisor. Financial advisors can help you maximize your mutual fund investments. They can help you.
- Prioritise your goals
- Get the best advice about SIPs and investments
- Create a plan that meets your needs
To make informed investments decisions, you should consult a financial advisor.