What is mutual funds?

 Mutual funds 

In this blog we will talk about mutual funds I will give you some answers in this blog like what is mutual fund? How many type of mutual funds? So if you want to learn about mutual funds. So read this blog complete.

What is mutual funds?

Mutual funds is a special kind of investment through which you can invest on different types together. You can do a diversifies investment by investing one place. Asset management company and may people like you do so that company invest all the money collectively at different places. They have appointed experts and with thier suggestion they invest the money. They invest money at different places and the return rate they get collectively from these different places out of that sone small percent 1-2% is kept as a profit by the asset company and the rest you get back as per that return rate. HDFC, HSBC, ICICI, Aditya Birla, Reliance, TATA there are few examples of companies and banks who have started thier own asset management company. All the company starts different kinds of mutual funds in large numbers. For Example ICICI has started more than 1200 mutual funds. So how risky is your mutual funds and what is the return depends on the mutual funds that you are investing investing in mutual funds can give the return rate of 4% and also of more than 30% top. It can be of zero risk and also of high risk to. Because all this depends on where the asset management company is investing your money. If that company is investing on stock than it will be more risky and you will get more returns and if it's investing in the government bonds then it will be less risky.

How many types of mutual funds?

Different types of mutual funds depends on the basis of the investment done by AMC people. We can divide this in the 3 categories: Equity mutual funds, Debt mutual funds and Hybrid mutual fund.

Equity mutual funds: In equity mutual funds, your money will be invested in the stock market. So naturally in this type of mutual funds generally the risk is more and also the return. In the stock market on which kind of company are you investing, if it's a big company then it's called as large company equity funds. If it's a small company then it's called as small cap and in the same way Mid cap equity funds. Big company doesn't have much risk as compared to the smaller ones but big companies won't have growth rate as high as it can be for the smaller companies. So risk and return both are less in the big companies.

Diversified equity funds: Here the investment is done in the large, medium and small cap or it's done different companies.

Equity linked Savings scheme (ELSS): Next type is equity linked Savings scheme that is ELSS, this is a special type of equity funds where you can save our tax. You save your tax in your profit.

Sector Mutual funds: In sector mutual funds invest in this type of companies stocks who belong to agriculture sector. All the companies which are under the agriculture sector, they are invested on. A logistic or transport sector, so there on example for this UTI transportation and logistic funds. So the investment is done in that sector. These funds are more risky, since all the investment is doing in one sector so if the sector is going down everything depends on that.

Index funds: Index funds are passively managed funds that is no agent of AMC is looking at where to invest the money here. These are passively managed that is according to the market's rate up and down they too go up and down looking at the price of Sensex and Nifty it varies.

So these are few main types of investments that I have told you but there are some others types too. Like Government bonds, corporate bonds and we have crypto currency too these days people also invests in Bitcoins. 

What is diversification?

A general well known advice is that friends you should never invest your money at one place. You should invest at different places so that if there's any crash then you will not have to bear the over all loss It's a very less chance of everything crashing altogether like Gold, Properties and even stock markets as this happens were rarely chances are that if one thing crashes then you get profit from the other. This is called as diversification, you have to invest at different places.