Mutual funds are professionally-managed investment schemes which are usually run by an asset management company, or AMC. These AMCs bring together a group of people and invest their money in stocks, bonds and other securities. SEBI regulates all the mutual funds in India. SEBI has created strict regulations to protect the interests of the investor. The advantage of investing through a mutual fund is that it gives small investors access to professionally-managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital.
What are Mutual Funds?
The Mutual Fund (MF) represents a pool of funds that expert Mutual Fund managers manage professionally. They keep a record of the performance and growth of these funds and make required alterations so that the funds perform well and the investors receive the best possible returns. Mutual Funds are controlled by an AMC (Asset Management Company) that collects funds from a group of investors and invests these funds in bonds, stocks, and securities.
Different Types of Mutual Funds
Debt Funds
A debt fund is a type of Mutual Fund that invests in fixed-income securities. In this fund, the fund manager will invest people’s money in short-term bonds, long-term bonds, securitised funds, floating-rate debt, and money market instruments.
Equity Funds
An equity fund is a type of Mutual Fund that invests money primarily in stocks. There are both actively and passively managed funds.
Equity-Linked Savings Schemes
This is an equity Mutual Fund with a lock-in period in nature. This helps people save taxes and also helps to grow their wealth. A person can enjoy tax deductions as per the Income Tax Act under Section 80C.
Diversified Funds
A type of Mutual Fund allows people’s money in diverse sectors or industries. A person can spread their investments across various industries in the market.
Gilt Funds
This type of fund allocates money to securities offered by the state and central governments. These funds come without any default risk.
Index Funds
In this category of Mutual Funds, people’s money will be invested according to how a stock market index functions. The NAV for these funds will closely follow the rise or fall in the index.
Liquid Funds
This type of investment plan will allocate funds primarily to money market instruments such as treasury bills, term deposits, certificates of deposits, commercial papers, etc. These funds come with a lower maturity period.
Debt-Oriented Hybrid Funds
In this category, people’s money will be primarily invested in debt, and the remaining part will be invested in equity. It is a blend of both debt and equity investment.
Arbitrage Funds
These funds are the same as equity plans for taxation purposes. These funds invest both in the cash market and the derivatives market.
Dynamic Bond Funds
The fund manager invests the people’s money in debt and money-market instruments. The maturity of the fund will also vary according to the investments that it makes.
Mutual Fund Tools & Best Fund Lists
Explore our data-driven mutual fund tools and curated lists to find the best investment options based on returns, risk, and SIP performance:
Best Mutual Funds
- Best Mutual Funds in India
- Best Equity Mutual Funds in India
- Best Debt Mutual Funds in India
- Best Hybrid Mutual Funds in India
- Best SIP Mutual Funds in India
Tools & Calculators
Use these tools to compare funds, analyse SIP performance, and build a well-diversified mutual fund portfolio based on your financial goals.
Conclusion
In conclusion, mutual funds have the potential to be a great investment and wealth-building opportunity for investors. They offer diversification, professional money management and are relatively low in terms of fees. Mutual funds also give investors the ability to easily access specific areas of the market that otherwise would require extensive research and experience. For these reasons, mutual fund investments can be an effective way of investing your money with minimal risk.