Types of Mutual funds


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Mutual funds are very diversified area of investment. It is divided in to different types. Some of the types are explained here.

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Types of Mutual funds

  1. 1. Before knowing the types of mutual funds we need to know what is Mutual funds. A Mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities. It is said “No matter what type of investor you are, there is bound to be a mutual fund that fits your style”
  2. 2. Mutual Funds are divided into six types: 1) 2) 3) 4) 5) 6) Index Funds Diversified large cap funds Sectoral funds International funds Gold funds Fund of funds
  3. 3. It is a type of mutual fund in which a portfolio is constructed to match or track the components of a market index, such as the S&P CNX 500 or CNX Midcap 100. They are the most riskiest funds of all.
  4. 4.  Index Funds invest in stocks comprising indices, such as the Nifty 50.  There can be funds on other indices which have a large number of stocks such as the CNX Midcap 100 or S&P CNX 500.
  5. 5.  Passive diversification.  Performance can be evaluated very easily.  It has low expense because transaction cost is very low.
  6. 6. These are funds which restrict their stock selection to the large cap stocks. It is generally perceived that large cap stocks are those which have sound businesses, strong management, globally competitive products and are quick to respond to market dynamics.
  7. 7. It typically invest in the top 100 or 200 stocks with highest market capitalization and liquidity. Therefore, there for these funds are considered as stable and safe.
  8. 8.  Actively managed.  The fund manager pores over data and information, analyses market trends, takes into account government policies on different sectors and then selects the stock to invest.  It has high expense.
  9. 9. A sector fund is a mutual fund that invests in a specific sector of the economy, such as energy or utilities. Sector funds come in many different flavors and can vary substantially in market capitalization, investment objective and class of securities within the portfolio.
  10. 10. It invests in:  IT Funds  Pharama Funds  Infrastructure Funds  Technology Funds  Growth Funds  Real Estate Funds
  11. 11.  It is very diversified.  It do not permit investor to invest funds to invest over 10% of their Net Asset Value in a single company.  This is to ensure that schemes are diversified enough and investors are not subjected to undue risk.
  12. 12. It is defined as a mutual fund, closed-end fund or exchangetraded fund that invests in companies located outside of the investor's country of residence. Foreign funds offer individual investors access to international markets. Investing abroad poses risks, but can also help investors diversify their portfolios. Introduction
  13. 13. Many mutual funds focus on manufacturing and production stocks within precious metals, a few new ETF entries have focused primarily on ownership of gold bullion. Gold is also valuable as a bet against a falling currency.
  14. 14. Some funds invest in the indexes of mining companies, others are tied directly to gold prices. For the average gold investor, however, mutual funds and ETFs are now generally the easiest and safest way to invest in gold.
  15. 15.  Low cost and low minimum investment required  Diversification among different companies  Ease of ownership in a brokerage account or an IRA  Require no individual company research
  16. 16. In simple words it is a mutual fund that invests in other mutual funds. Fund of funds allows investors to achieve a broad diversification and an appropriate asset allocation with investments in a variety of fund categories that are all wrapped up into one fund. Fund of funds carries an operating expense, investors are essentially paying double for an expense that is already included in the expense figures of the underlying funds.