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What is Mutual Fund & Its Types

A Mutual Fund is the easiest and safest way to make money in short time. It doesn’t require lots of money to invest in it, but even anyone can invest with just Rs.500 per month. Many people consider mutual fund and the stock market as same which is not true. Mutual fund and stock market are part of a market, but both are different.

The mutual fund is a type of fund which collects the money from many investors to put it mutually together. This is fund is managed to earn to earn the most possible profit. Basically, the mutual fund is a fund created by money invested by many investors. This fund is managed by a professional manager who is known as Professional Fund Manager. The Professional fund manager is responsible for the managing fund and investing it in the right place to make more profit for investors.

Mutual Fund is registered under SEBI (Security and Exchange Board of India) which regulates the Indian market. SEBI keeps the investor’s money safe.

Mutual fund industry was started in the year 1963 in India. Its aim was to attract small investors and make them aware of investing and market-related information.

Types of Mutual Fund:

There are many types of mutual fund, but it is mainly divided into two types which are on the basis of structure and on the basis of the asset.

A) Types of Mutual Fund on the basis of Structure:

  1. Open-Ended Mutual Fund: This plan allows the investor to sell or buy the fund anytime. There is no fixed time or date to for buying or selling in this.
  2. Closed Ended Mutual Fund: In this type of mutual fund is the investors can buy or sell the fund under fixed time only. This type of fund is added in share market and later used in trading also.
  3. Interval Funds: This type of mutual fund is created by the mixture of open-ended and closed-ended mutual fund. It allows investors to invest in pre-determined intervals and also allows for trading.

B) Types of Mutual Fund on the basis of Asset:

  1. Debt Funds: These funds are less risk-taking because it invests on the government bond or other fixed income which are safe investments. Debt funds provide a fixed return to investors. But, if the investor’s income is more than 10,000 then the person will need to pay tax.
  2. Liquid Mutual Funds: This is also a secure option to invest money. The liquid fund invests in the short time debt instruments. Therefore, if someone wants to invest for a short time, then this will be a good option.
  3. Equity Funds: Equity fund is for the people who want profit for a long time. These funds are invested in the share market. They are more risk-taking but also give more profit than others.
  4. Money Maker Fund: These funds give enough return from short-term investment and they are invested in secured place also.
  5. Balanced Mutual Fund: This type of mutual fund is created by the mixture of Debt fund and Equity fund. The fund collected in this mutual fund is invested in equity and debt both. This type of fund gives stability and growth in earning to investors.

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