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5 Most Popular Types Of Mutual Funds

By Author: Vikas Malhotra
Total Articles: 1

Investing in MFs is an excellent way to let professionals handle your money and do all the hard work while you get to enjoy amazing returns. But as someone who is new to mutual fund investments, it can be very difficult to understand the different types of funds. A mutual fund should be selected on the basis of your risk appetite, investment goal, and the duration for which you want to invest.
To make things easier, we will help you understand 5 of the most popular types of funds.

1.Equity funds
In simple words, equity funds invest your money in stocks. These mutual funds focus on growing your investment faster than fixed income or debt funds. They are further divided into small-cap, mid-cap, and large-cap funds. But as the growth potential is higher than other types of funds, they also carry the most amount of risk.

2.Debt funds
These funds invest your money in the debt market instruments, like corporate bonds, government securities, debentures, commercial papers, etc. These funds too are further divided into many different types, like liquid funds, fixed maturity plans, ultra-short term funds, short-term funds, income funds, and many others. These funds are suitable for risk-averse investors looking for long-term investment.

3.Balanced/Hybrid funds
If you want the growth potential of the equity funds along with the safety of debt funds, then balanced/hybrid funds can be a good option for you. These funds invest your money in equity as well as debt market. Depending on the investment style, there are equity-oriented balanced funds and debt-oriented balanced funds. Equity-oriented funds have higher exposure in the equity market, and debt oriented funds invest most of your money in debt instruments.

4.Fund of funds
As the name suggests, these funds invest your money in other funds. Just like the balanced funds, fund of funds too makes the diversification and asset allocation easier for investors. There are many different types of fund of funds which allow the investors to invest as per their return expectation, investment goals, and risk profile.

5.Exchange Traded Funds
ETFs track one particular commodity, index, or multiple assets. Unlike other types of mutual funds, you can buy and sell ETFs on a stock exchange. These funds have underlying physical holdings of commodities and invest in precious metals, currencies, and stocks. Many of the ETFs also enjoy the advantage of active options market where the investors can leverage or hedge their positions.

If you are new to mutual funds, these are 5 of the most popular types of funds that you can consider. But no matter what fund you select, make sure that you first thoroughly understand the fund and the risks associated with it before investing.

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