Types Of Mutual Funds – Finance Xod

Before start investing in mutual fund, You need to know about its types. Given are 5 types of Mutual Fund.

1 .Equity funds

Where these funds can give you higher rate of returns they are very risky.As the funds directly invest into stock market. And when we say higher risk it means you can lose more money, as it depends on the changes occur in market and market is never stable. There are different type of equity funds which you can choose from according to the your need. Some funds specialise in growth stocks where you do not get paid dividends, then there are income funds where you may get large dividend. Other are value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of these.

1. Money market funds
   These funds invest in short-term fixed income securities such as government bonds, treasury bills, bankers fund, commercial paper and certificates of deposit. With the lower potential return they are highly save.

2. Fixed income funds
   Just like government bonds Or investment grade corporate bonds. These funds invest in bonds which pay a fixed rate of return. These bonds are very similar to high-yield bonds. Through the interest earned on these funds there is a regular flow of return. Government and invest grade bonds are generally at the lower risk that that of the high-yield corporate bond funds.

3. Basket Trading
   Basket trading also known as balance funds maintain a balance between equities and fixed securities these funds invest in a mix of both. They try to balance the aim of achieving higher returns against the risk of losing money. Aggressive funds hold more equities and fewer bonds, while conservative funds hold fewer equities relative to bonds.

4. Fund-of-funds
   It is a mutual scheme which invest in the same mutual fund or other mutual funds, instead of investing in securities. These funds can invest in equity oriented, debt oriented and liquid schemes. Prudential ICICI was the first to introduce Fund of funds (FOF).

5. Hedge Funds
   There is no exact definition of the term 'Hedge Funds'. In general, Hedge funds are unregistered private investment partnerships, funds or pools that may invest and trade in many difference markets, strategies and instruments. Hedge fund have an investor base compromising wealthy individuals and institutions and relatively high minimum investment limits.

6. Leverage funds: They tend of indulge in speculative trading and risky investments where the portfolio is large resulting in greater benefits.
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