Mutual funds are financial systems where an AMC (Asset Management Company) or a fund house uses the funds raised from investors with a common investment goal to buy securities such as bonds or stocks. In mutual funds, funds raised from investors are combined and pooled funds are used to buy the securities.
Once the purchase is completed, investors will be assigned the units based on their investment amount.
There are numerous mutual fund systems available for investments such as:
- Major capital investment fund:
Equity funds that invest a large portion of total assets in companies with high market capitalization are called large-cap funds. Companies have a good reputation and have a good track record of wealth generation for investors. Large-cap funds are famous for providing regular dividends and pooling wealth. They are optimal investments for investors with a low profile and a long investment horizon.
- Medium capital investment fund:
Medium-capital funds allocate their equity funds and equity-related instruments to medium-sized companies. Mid-cap companies rank between 101 and 250 on the company’s list based on market capitalization. Medium capital funds have decent volatility, so they offer decent returns. They offer a decent combination of risk and return.
- Small capital investment fund:
Small-cap funds allocate a large portion of their investment funds to equity-based instruments of low-cap firms. Small-cap firms are firms that fall below the range of 250 according to market capitalization. Small-cap funds have decent volatility and offer the opportunity to get high returns. Therefore, they are optimal investments for short-term returns.
- Debt fund:
Debt funds are investment fund systems invested in fixed income plans, such as corporate debt securities, money market instruments, government bonds, and so on.
- Money market fund:
In money market funds, your funds are invested in market securities, such as bonds, dated securities, certificates of deposit, and so on. Following the investment, the fund manager will provide periodic dividends as a return.
- Hybrid funds:
Hybrid fund plans are funds made up of both equity and debt. Therefore, they are suitable investments for investors who want to get debt stability along with high returns.
Therefore, there are several types of mutual funds available to investors. Investors should review the type of fund, past returns and investment objective before investing in the plan.