What is a Mutual Funds?

A mutual fund is an investment system that collects money from individuals and invests it in a variety of assets. The funds raised from diverse investors are often invested in financial products such as stocks and money-market instruments such as certificates of deposit and bonds. Asset classes are broadly classified as equity, debt, and money-market instruments. These investments could be made in the short, medium, or long term. The risk factor of the funds is also determined by the type of asset invested in.

Ways to Invest in Mutual Funds

SIP (Systematic Investment Plan) : SIP allows you to invest a specified amount at specified periods. Because it is convenient, SIP is one of the most suggested strategies to invest in mutual fund schemes. It also helps you average out the cost of purchasing these funds’ units.

Lumpsum: A lumpsum investment is one that is made only once. Lumpsum investments are typically made when people receive a large sum of money, such as bonuses or proceeds from the sale of an asset.

Types of Mutual Funds Based on Asset Class

Mutual funds in India are classified according to the asset class in which they invest. The following are some popular and common categories.

Equity Mutual Funds

The majority of the assets in equity funds are invested in equities. These funds are grouped into various groups based on the market capitalization of the stocks in which they invest.

Types of Equity funds:

• Large-Cap Funds: These funds invest at least 80% of their assets in the top 100 companies by market capitalization.
• Mid-Cap Funds: These funds invest at least 65% of their assets in the next 150 companies ranked by market capitalization.
• Small-Cap funds: Such funds invest at least 65% of their assets in companies ranked 251 and above by market capitalization.
• Multi-Cap Funds: These funds invest at least 25% of their assets in each of the large, mid, and small-cap stocks.

Debt Mutual Funds

Debt funds make money by lending money to corporations and the government by purchasing their debt documents. These funds are grouped into various categories based on the length of the lending period and the credit quality of the papers.

Types of Debt funds:

• Money Market Funds: These funds generate returns by lending to companies or governments for up to 1 year.
• Corporate Bond Funds: These funds generate returns by lending to companies with the highest-rated debt documents (at least 80% of the time).
• Overnight funds: These funds earn their returns by lending to companies or governments for one business day.
• Liquid Funds: These funds generate their returns by lending to companies or governments for up to 91 days.

Hybrid Funds

Hybrid funds invest in a variety of asset classes, such as stock, debt, and gold. There are various types of hybrid funds based on how much money they distribute to various asset groups.

Types of Hybrid funds:

• Aggressive Hybrid: These funds must invest at least 65% of their assets in equities, with a maximum of 80%. The rest is goes into debt funds.
• Multi-Asset Allocation: These are hybrid funds that invest at least 10% of their assets in at least three asset types, such as stock, debt, gold, and so on.
• Dynamic Asset Allocation funds: These funds, also known as Balanced Advantage Funds, can invest up to 100% of their assets in equities or debt depending on established asset allocation models.
• Arbitrage Funds: These funds generate returns by using opportunities of price differences of securities in different markets.

How To Start Your Investing Journey in Mutual Funds?

Investing through SIP helps to steadily build your wealth and achieve financial goals, thus making your money work for you. Connect with us: https://www.assetplus.in/mfd/ARN-275128

or directly register and invest on Aditya Birla Pure Value fund from below link:
https://abcap.co.in/MF/mupBzrQ

or directly register and invest on Aditya Birla Balanced Advantage Fund from below link:
https://abcap.co.in/MF/FD57XF2