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What is Mutual Fund ?

Several investors can pool their money using this investment entity. The fund manager then invests this collective capital to produce returns across a range of asset types, including stock, debt, gold, and other instruments. Investors receive a percentage of the gains and losses from these assets based on their investment share.

Advantages

Advantages of Mutual Funds

Diversification

Since mutual funds invest in a variety of securities, including stocks, bonds, and other financial instruments, even a little contribution can create a diversified portfolio, which lowers risk.

Well Regulated

The SEBI oversees the regulation of mutual fund programmes. The strict laws guarantee open communication and safeguard the interests of investors.

Affordability

For just 500, you can begin investing in these funds. Thus you don't need a lot of money to start investing.

Returns

The performance of these funds is evaluated in terms of the returns they provide, just like any other investment product. Historically, the returns offered by other conventional investment choices, such as bank FDs, RDs, PPFs, etc., have lagged behind mutual funds.

Liquidity

It has to do with how simple it is to buy and sell investments. Compared to some other instruments, mutual funds have better liquidity because you can purchase and sell them whenever you choose.

Professionally Managed

The fact that your money is managed by seasoned financial experts is one of the main advantages of participating in these funds.

Equity Mutual Funds

The majority of the assets that equity funds hold are equities. Based on the market capitalization of the stocks they invest in, these funds are divided into various groups.

Large-Cap Funds

These funds put at least 80% of their money into the top 100 market-cap corporations.

Mid-Cap Funds

These funds allocate at least 65% of their resources to the following 150 (101st to 250th) market capitalization-ranked companies.

Small-Cap funds

These funds allocate at least 65% of their assets to businesses with market capitalizations of 251 and higher.

Multi-Cap Funds

Each of the major, mid, and small-cap stocks are represented by at least 25% of the assets held by these funds.

Debt Mutual Funds

Based on the length of the lending period and the paper's credit rating, these funds are divided into many categories.

Money Market Funds & Corporate Bond Funds

By making short-term loans to businesses or governments for up to a year, these funds create returns. These funds generate returns by making loans to businesses that have the highest-rated debt documents in the majority (at least 80%).

Overnight funds

By lending money to businesses or governments for one business day, these funds generate returns.

Liquid Funds

These funds generate their returns by lending to companies or governments for up to 91 days.

Hybrid Funds

Types of Hybrid Fund

Aggressive Hybrid

These funds must invest at least 65% of their assets in stocks, but they are not allowed to invest more than 80%.

Multi-Asset Allocation

These hybrid funds spread out at least 10% of their total assets among at least three different asset classes, such as gold, debt, and equities.

Dynamic Asset Allocation funds

These funds, also known as Balanced Advantage Funds, follow established asset allocation strategies and can hold up to 0–100% of their assets in either equities or debt.

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