Types of mutual funds – A closer look

In today’s #MoneySmartSeries, we’ll take a closer look at the different types of Mutual funds. Mutual funds are investment vehicles that pool money from many different investors for the purpose of investing in securities such as stocks, bonds and money market instruments. Broadly, mutual funds can be classified based on their maturity period and their investment objective.

Let’s understand three different types of mutual funds that are based on the maturity period.

  1. Open-ended fund: An open-ended mutual fund is a fund that is available for subscription on a continuous basis and can be redeemed anytime.
  1. Close-ended fund: A close-ended mutual fund is a fund that has a defined maturity period, e.g., 3-6 years. These funds are open for subscription for a specified period at the time of launch.
  1. Interval funds: Interval funds combine the features of open-ended and close-ended mutual funds. These funds may trade on stock exchanges and are open for sale or redemption at predetermined intervals.

Now let’s understand various types of mutual funds that are based on the investment objective.

  1. Equity funds: These mutual funds invest a major part of their corpus in stocks and the investment objective of these funds is long-term capital growth. These funds may invest in a wide range of industries. These mutual funds are suitable for investors with a long-term outlook.
  1. Debt and money market funds: Debt mutual funds generally invest in securities such as bonds, corporate debentures, government securities and money market instruments. These mutual funds are likely to be less volatile than equity funds and produce regular income.
  1. Balanced funds: Balanced mutual funds invest in both equities and fixed income instruments in line with the pre-determined investment objective of the scheme. These mutual funds may be ideal for investors looking for a combination of income and moderate growth.

Next Steps

Hopefully, you now have a better understanding of the the different types of Mutual funds and how they work. We also hope that you can now invest in mutual funds with confidence. To talk to an investment advisor or to find learn more about the  the Meristem equity of money market funds, please call send an email to info@meristemng.com or call 01-448 8260.

 

 

 

Source: investopedia.com

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