A mutual fund is a professionally managed investment vehicle that pools money from many investors and invests in different securities as per the investment objective of the scheme. These investors may be retail or institutional in nature.
Mutual funds have various advantages compared to direct investing in securities. The primary advantages of mutual funds are that they provide professional management, diversification, liquidity, and economies of scale.
Primary structures of mutual funds include open-ended funds and closed-ended funds.
Debt Funds
A debt fund is a fund that invests primarily in bonds or other debt securities with the primary objective of income generation and capital preservation.
Equity Funds
An equity mutual fund invests in equities and equity-related securities with the objective of capital appreciation in the long term.
Hybrid Funds
Hybrid mutual funds invest in a mix of equities and fixed-income securities, balancing growth potential with stability for diversified portfolios.
Solution Oriented Funds
Solution-oriented funds are mutual funds designed for specific financial goals, such as retirement and education, typically with a lock-in.
Other Funds
Other funds include various mutual fund categories like Index Funds and ETFs, each targeting specific investment objectives.