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Understand Different types of Mutual Fund.
 
Mutual Funds
Mutual Funds are pool of money collected from investors. The collected money will beinvested in the markets such as equity, debt, money market, etc. Mutual Funds are managedby professionally qualified fund managers, the professionalism and experience of the fundmanager will help you in generating huge returns out of the investment. There are differenttypes of Mutual Funds in the market such as Stocks funds, Bonds funds, Money marketfunds
 
, Balanced fund, Asset allocation funds, etc. Again these funds have sub category.Selecting the best one that suits your need is very important. This article is designed in such away to make you understand about all types of mutual funds. So that you will be able tochose the best one.
Advantages of Mutual funds 
Below given are the major advantages of investing in Mutual Funds
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Diversification 
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Professional Management 
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Greater convenience 
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High liquidity of Fund 
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Minimum Initial Investment 
Types of Mutual Funds
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Mutual funds fall into the following major categories;
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Stocks funds 
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Bonds funds 
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Money market funds
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Balanced fund
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Asset allocation funds 
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Stock funds 
As the name implies, stock mutual funds invest mainly in stocks. These stocks may be sold onthe Stock exchanges. Unlike bond funds the very objective of stock funds are long-term
 
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capital appreciation. In bond funds, major income is generated frominterest/dividend. However, stock funds may generate modest dividends from the stocks inthe portfolio and from short-term cash investments but major part of income is from capitalappreciation. Meaning of capital appreciation is very simple, the value increase/ priceincrease in the invested stock is called capital appreciation.
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Types of Stock Funds
 
There are five basic types of stock funds they are;
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Large Cap 
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Mid Cap 
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Small Cap 
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International 
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Sector 
Large Cap Funds
Large Cap Mutual Funds are primarily invests in "Blue-chip" companies (large companies). Itmeans well-known industrials, utilities, technology, and financial services companies withlarge market capitalization. Large cap stocks are perceived to be less risky than small and midcap companies.
Mid Cap Funds
 
Mid Cap Mutual Funds are primarily invests in companies with relatively small marketcapitalization. The market capitalization of companies where mid cap mutual funds areinvesting will be smaller than large cap and larger than Small cap companies. Mid caps aregenerally considered more risky than large cap stocks but have a higher return potential.
Small Cap Funds 
Small Cap companies are primarily invests in emerging/budding companies. Small caps aregenerally considered as the riskiest fund compared to other two types of funds but it carriesthe expectation of higher returns. Small cap funds are subject to greater volatility than thosein other asset categories.
International Funds
 
International funds are primarily invests in stocks traded on foreign exchanges but purchasedin India by Indian fund management companies. Apart from the basic risks, internationalfunds are subject to additional risks such as currency fluctuation, political instability and thepotential for illiquid markets.
 
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Sector Funds
 
Sector Funds are investing primarily in specific industry sectors such as technology, financials,health, energy, etc. Sector funds focus their investments on companies involved in a specificindustry sector. Sector Funds involve a greater degree of risk as it doesn’t diversify theportfolio.
Bond funds 
Bond funds invest in various types of bonds - issued by corporations, municipalities, and thegovernment of India. Bond mutual funds are designed mostly to provide investors with asteady stream of income versus.
Types of Bond Funds 
There are three basic types of bond funds.
GovernmentMunicipal CorporateGovernment bond funds
 
Government bond funds primarily invest in bonds issued by the government of India.Investing in Government bond funds will be safe compared to any other funds because IndiaGovernment is the authority issuing the bonds. These funds provide relatively decent returns.
Municipal bond funds
 
Municipal bond funds invest primarily in municipal bonds issued by state and localgovernments and their agencies to fund projects such as schools, streets, highways, hospitals,bridges, etc. Municipal bonds can be insured or non-insured securities.
Corporate bond funds
 
Corporate bond funds are those funds in which the invest I made in bonds issued bycorporates to fund their business activities. These funds are relatively more risky than othertwo forms of funds and also offer an opportunity to earn greater returns.
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