Confused about all the different types of mutual funds out there? You’re not the first one. Luckily we’ve simplified all the different fund types right here. To help you understand the difference between everything from ELSS funds, Liquid funds & Equity funds to Debt Funds. Let’s start by understanding the basics of mutual funds.
August 25, 2020
Schedule a call based on your convenience. And get an expert to help you invest.
Confused about all the different types of mutual funds out there? You’re not the first one. Luckily we’ve simplified all the different fund types right here. To help you understand the difference between everything from ELSS funds, Liquid funds & Equity funds to Debt Funds. Let’s start by understanding the basics of mutual funds.
What is a mutual fund?
A mutual fund is, in simplified terms, a large pool of money that is managed by a professional fund manager. This fund manager (or multiple fund managers) invest(s) this money in stocks, bonds, and other securities. The goal is to manage the money in a manner that investors get a good return. A mutual fund is, therefore, considered safer than buying stocks directly. Depending on the kind of asset a mutual fund invests in it is further divided into multiple categories. Let’s take a look at these different types of mutual funds.
Equity Funds
Equity funds are mutual funds that primarily invest in stocks.
They own shares of companies & this is why Equity Funds are also called stock mutual funds.
Equity Funds are categorized by the size of the companies they are invested in.
The holdings they have in their portfolio and the geographical location of the company.
Debt Funds
Debt funds or Bond funds are mutual funds that invest in government bonds, liquid funds, treasury bills and other fixed-income securities.
Since they do not invest in equities and invest in fixed income instruments they are considered safer than equity funds.
However, there is no guarantee on this low-risk investment. Returns are expected in a predictable range making Debt Mutual Funds a favourite for conservative investors.
Debt Mutual Funds are managed by professional Fund Managers that have strategies they diversify and align their fund to.
Speciality funds get their name from their approach towards investments.
These funds are mutual funds or other funds that focus on one particular sector, geographical region or industry.
A good example of this would be funds that invest in renewable energy or power etc.
These funds reflect a specific view and can reflect an investor’s personal belief about the nature of industries, sectors or show a bias towards anyone “speciality”.
You can also watch Cube Wealth’s Perfect Portfolio builder guide
Rishabh P Nair
Rishabh P Nair is the Head Of Brand Content at Cube Wealth. Rishabh has been weaving stories for over 10 years and prides himself on building brands with a strong identity.
Top 4 Reasons To Try Our Powerful Investment App!
Schedule a call based on your convenience. And get an expert to help you invest.
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!