A mutual fund is an investment fund. It is a pool of money that is accumulated by several investors. This pool of money is then invested in asset classes such as debt funds, equity funds, etc. Mutual funds are registered with SEBI and are regulated as well. Mutual funds are of various types and investment in each fund is dependent on the investor’s financial goal.  Here we share the types of mutual funds and their benefits.

• Debt Funds

As the name suggests, a debt fund invests in debt securities such as government bonds, fixed income assets, company debentures, etc. Debt funds provide a fixed rate of return and are considered to be a safe form of investment. The different types of debt funds are as follow:

• Liquid fund

A liquid fund is a debt mutual fund that invests in financial instruments such as government bonds, CPs, treasury bills, etc. Liquid mutual funds have a maturity period of 91 days.

• Short Term and Ultra Short Term Funds

Short term mutual funds are funds that have a maturity period from a minimum of 15 to 91 days. Ultra short term mutual funds have a maturity period of 2 to 4 months.

• Income Funds

An income fund is a fund that emphasizes your current income. This is a steady option for investors who wish to earn an income in the present.

• Equity Funds

Equity funds are funds that invest principally in shares or stocks of a company. These are also known as stock funds. They are categorized according to the company size, style of the investment holding and geography. The different types of equity mutual funds are as follows:

• Blue Chip Funds

These are funds that invest in stocks of blue-chip companies. Blue-chip companies are those companies that are well-established and are financially sound. These companies have regular dividend payments and profitability.

• Hybrid Funds

Hybrid funds are a type of mutual fund which invests in more than one type of investment security such as stocks and bonds. These types of funds are apt for beginners who are just exploring investing in mutual funds.

• Tax Saving Funds

Tax Saving funds such as Equity Linked Saving Scheme attract the attention of a lot of investors. There is a three-year lock-in for such types of funds after which the investment made under the scheme is exempted from taxes as per Section 80C.

• Value Discovery Funds

These are funds that invest in companies that have attractive valuation and showcase promising growth. This is in terms of their earnings or book value.

Mutual funds are a credible vehicle of investment that can help you earn good returns and create wealth for the future.