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MUTUAL
FUNDS
Mutual
Funds in India
Mutual Fund is an
instrument of investing money. Nowadays, bank rates have
fallen down and are generally below the inflation rate.
Therefore, keeping large amounts of money in bank is not
a wise option, as in real terms the value of money
decreases over a period of time.
One of the options is to invest the money in stock
market. But a common investor is not informed and
competent enough to understand the intricacies of stock
market. This is where mutual funds come to the rescue.
A mutual fund is a group of investors operating through
a fund manager to purchase a diverse portfolio of stocks
or bonds. Mutual funds are highly cost efficient and
very easy to invest in. By pooling money together in a
mutual fund, investors can purchase stocks or bonds with
much lower trading costs than if they tried to do it on
their own. Also, one doesn't have to figure out which
stocks or bonds to buy. But the biggest advantage of
mutual funds is diversification.
Diversification means spreading out money across many
different types of investments. When one investment is
down another might be up. Diversification of investment
holdings reduces the risk tremendously.
On the basis of their structure and objective, mutual
funds can be classified into following major types:
Closed-end funds
Open-end funds
Large cap funds
Mid-cap funds
Equity funds
Balanced funds
Growth funds
No load funds
Exchange traded funds
Value funds
Money market funds
International mutual funds
Regional mutual funds
Sector funds
Index funds
Fund of funds
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