TYPES OF MUTUAL FUNDS?
Equity Mutual funds invest 65% in equities and rest 35% in debt or money market funds. They are categorised as high risk compared to others and best suited for long term goals. Greater the risk, greater the potential return in the long run. Compared to directly buying stocks, Equity Mutual Funds are less risky and generate steady returns too. They are ideal for investors who are starting off and are in the prime earning stage, as they give great returns in the long run.
Equity Mutual Funds invest in infrastructure, FMCG, Banking, goods, automobiles and other such companies.
Compared to Equity Mutual Funds, Debt funds are safer and secure though they don't provide a high rate of returns compared to equity. These funds invest 100 percent in debt funds and securities. They provide steady and fixed returns.
Also famous as liquid funds, these mutual funds provide immediate returns as well as instant liquidity in case of redemption. Used to park funds ideal or surplus funds for a short duration of time, these mutual funds are stable and steady though come with low returns. MMMF invests in Treasury Bills,
Certificates of Deposit and Commercial Paper for less than 91 days.
Portfolio diversification is of paramount importance when it comes to wealth building. Balanced or Hybrid Funds are important for that, as they invest both in equity and debt mutual funds. In this, 65% of the amount invested is dedicated to equities and the rest 35% is allocated to fixed income instruments and debt-based securities.