Mutual funds Benefits
Mutual Funds are an ideal option for investing when you need convenience. You can invest regularly, start with a smaller amount and liquidate your investmentswhenever in need. These factors make them a must have option for planning your life goals. The other big advantage mutual funds provide is that they can help you in meeting all your goals be it short term or long term. With different schemes at its fence you can select one based on your requirement. Some other advantage mutual funds give you are:
- Tax Efficiency
- Professional Management
Types of Mutual Funds Scheme
Today, Mutual Funds has more than 1000 schemes which an investor have to analyze for creating a portfolio. These schemes pertain to different categories and so they have different risk return characteristics. For creating an effective portfolio as per ones risk profile and investment objective, a basic understanding of these categories is necessary. This also helps in diversifying your investments in different segments of markets thus helping you take appropriate exposure and avoiding any duplication.
Listed below are various categories of mutual funds which are present today-
- Large Cap Equity Funds: Here, 80-100% of the corpus is invested in large cap companies like Infosys, Reliance, HDFC Bank etc. The objective of the fund is to give consistency along with downside protection.
- Multi Cap Equity Funds: Here, 40-60% is invested in large cap companies and the rest is spread across companies in mid & small cap sector. The varied range gives fund manager flexibility to change allocation as per the market conditions.
- Mid Cap Equity Funds- As the name suggest, the fund is tilted heavily towards mid cap companies with an objective to generate higher returns.
- ELSS: These schemes give benefit under section 80C and have a lock in of three years. The investment universe of ELSS varies from large cap to mid-cap companies.
- Hybrid: There are various categories under hybrid funds. A fund which has an exposure of more than 65% in equities is categorized as Equity Oriented Hybrid Funds such as Balanced Fund. There are funds with 5-30% exposure towards equities like Monthly Income Plans which are debt oriented hybrid funds. Then there are funds like arbitrage and asset allocation funds which also falls under hybrid funds categories and where the investment allocation changes in defined categories.
- Income Funds: Invest primarily in government securities, corporate bonds and other debt instruments. Based on maturity of these securities, there are short term and long term income funds.
- Gilt Funds: These mutual fund schemes invest only in government securities with varied maturities. These in turn are classified as medium and long term based on maturities of their invested securities.
- International Funds: An international mutual fund scheme has more than 65% of assets invested outside India. These funds were launched with an objective of providing diversification to Indian investors by capturing opportunities available in the international markets.
Thus as you can see mutual funds have schemes catering to various objectives and By combining these options an investor can capitalized on capturing the broader market and diversify his/her investment portfolio.