Mutual Funds in India You Can Use to Make Money
Posted: Dec 03, 2019
Thanks to its diverse range and ease-of-use, mutual funds are one of today’s most flexible, convenient, and comprehensive money-making tools that many people are using to build a robust investment portfolio. While there are various mutual fund schemes offering a range of solutions to meet the needs of investors, in general, a mutual fund will invest in either stocks, debt securities, or a combination of both. Additionally, mutual fund schemes are open-ended or close-ended. An open-ended scheme allows you to redeem your investment on any trading day, whereas, for close-ended schemes, there is a fixed maturity period after which you can withdraw funds.? Here are 5 common types of mutual funds you can use to earn money from your home.
What is an equity fund?
Investing in equity mutual funds means that you are parking your money in a variety of equity segments, as mentioned in the offer document. Equity funds invest a minimum of 65% of their capital in stocks and equity-oriented securities.? The primary focus of these mutual funds is to give investors significant capital appreciation in the long run. Equity funds, also known as growth funds, are ideal for investors with long-term goals and high-risk appetite.
Gilt funds only invest in government-issued securities and bonds, which have varying maturity periods. They are available in many flavors, including short-term and long-term gilt funds. Gilt mutual funds have high liquidity, as there is no risk of defaults. These funds are, however, sensitive to interest rates, and the only risk attached to this investment is a fall in the rate of interest.
What is debt fund?
Also called income funds, debt mutual funds generally invest around 65% of their core capital in a range of fixed-income securities, including bonds, government securities, corporate debentures, and other money market fixed-income instruments. Debt funds are more likely less volatile compared to equity funds, and many prefer them for their low-risk profile.
Balanced mutual funds have hybrid designs, created to offer investors the benefits of both equities and debt instruments, in terms of capital appreciation and stability. Balanced funds, to provide the best of both worlds, invest around 40% of their capital in debt instruments and about 60% in equities.
What is liquid fund?Liquid mutual funds are an ideal investment option for those seeking moderate returns, with capital preservation and liquidity. Liquid funds or money market funds invest their capital for 91 days, or less, in low-risk instruments, such as Commercial Paper, Treasury Bills, and Certificates of Deposit. Investors looking for modest ROI on excess funds should explore the investment opportunities that liquid funds offer.
From high profit generating equity funds to safer options such as debt funds or liquid funds, investors, nowadays, have a bouquet of funds to choose from, according to their investment objectives. However, every investor needs to remember that mutual funds are subject to market, or systematic, risks, and they should read the offer document carefully, before investing in mutual funds.
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