Mutual Funds is an investment tool for investors. In mutual funds, your money is invested in different assets such as stocks, bonds, and commodities. If you are planning on owning a house, buying a car or anything, mutual funds serve you all your needs. It is a simple and effective way to save Income Tax.
Advantage of Mutual Funds:
- Diversification: There is diversification in Mutual Funds. It allows you to invest in different types of assets and securities for good return.
- Liquidity: Because of its liquidity nature, investors can in or out of the market at any point of time.
- Professional Management: Mutual Funds are professionally managed and regulated by SEBI or Security & Exchange Board of India.
- Low cost or Affordable to everyone: In Mutual Funds, anyone can invest, from an average person to a big firm. You can start investing in mutual funds at a low cost of Rupee 500 or 1000.
- Systematic and easy to process: In mutual funds investment the profit is very high as well as the risk is equally high. So by a systematic way of planning, you can achieve your needs and goals.
Types of Mutual Funds:
-> Equity Funds:
Equity is a share, fund or asset of a company. In these funds, investors invest your money in different assets and shares of various companies. The structure of Equity Fund is both open ended and closed ended.
-> Debt Funds:
Debt Funds are fixed rated income earning funds. In these funds, investors invest on Government Securities or Bonds, Money Market Instruments, and Treasury Bills. Debt fund also works as a tax efficient fund.
-> Hybrid Funds:
Hybrid Funds also knows as Balanced Fund. This fund is a combination of equity, bonds, and cash. Investment in Hybrid Fund provides both growth and income in one mutual fund.
-> Money Market Funds:
Money Market Funds are those mutual funds where we invest in a money market or securities. Corporate Commercial Bills, Commercial Papers, Treasury Bills, and Certificate of Deposit come under these Mutual Funds.
-> Tax Saving Funds:
ELSS or Equity Linked Savings Scheme comes under Tax Saving Funds. Investment in these mutual funds offers to tax deduction to investors under section 80C of Income Tax Law.
There is two structure of Mutual Funds namely:
Open-Ended Funds: In open-ended structure, you can withdraw your investment at any point in time and get your refund.
Close-Ended Funds: In close-ended funds, it’s just opposite. You can’t withdraw or close the scheme before maturity.