Different Types of Mutual Funds for Every Investor

The popularity of Mutual Funds has increased as an ideal investment option especially for small investors over the last few years all over the world. How there is another class of people who considers Mutual Funds as a risky option for investing money and does not consider it as a perfect investment. In the following article, we will explore the variety offered by Mutual Funds that makes it such a versatile and flexible option.

There is no doubt that MF involves some risk but you have a lot of flexibility to match you risk bearing ability with potential returns with various categories of MF available in the market. Moreover, it offers great opportunity for the aggressive investors to extract maximum possible returns in a planned manner. Similarly, conservative investors can also find suitable mutual funds to meet their objectives. There are different types of mutual funds to suit the requirements of every type of investors in terms of risk bearing, investable amount, term of investment, objectives to be fulfilled etc. MF can be categories in to three broad categories: Open Ended, Closed Ended and Interval MF.

Open Ended MF does not come with a fixed maturity date or period which means an investor can sell any desired units at any point of time and claim money. There are various categories in Open-Ended MF. There is a category of mutual funds known as Income or Debt Funds in which a large fraction of amount is invested in government securities to lower the risk of investment and slow but steady returns. Equity MF are also open-ended mutual funds and is the most popular category because it has the potential of very high returns on a large term.

Equity Funds are types of mutual funds, which serve as suitable for the early investors who can bear more risk and want to make their money grow at a brisk rate. Investors looking for short term investment options can invest in Money Market schemes that provide reasonable returns in quick time with moderate risk. People who are looking for balancing returns and risk and willing to invest for long-term can go for Balanced Funds. Money is these funds are invested in fixed income securities and equities in approximately same proportions.

Closed Ended MF have a fixed maturity period and people can avail these funds only when they are launched which is referred as NFO (New Fund Offer) period. Capital Protection scheme under this category aims to safeguard principal providing reasonable returns. Fixed Maturity Plans as the name suggests look to invest in funds whose maturity is aligned with the maturity date of funds. These funds does not require too much attention and hence have very low management cost.

Interval Funds are designed to provide advantages of both open ended and closed ended Funds with moderate returns. Mutual Funds need to be properly chosen by analyzing the risk and return factors. In addition, it is very important to set the objectives which you wish to achieve by investing in Mutual Funds.

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