Mutual Funds

Mutual Funds

MUTUAL FUNDS

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature.

Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors. On the negative side, investors in a mutual fund must pay various fees and expenses.

Primary structures of mutual funds include open-end funds, unit investment trusts, and closed-end funds.

EQUITY FUND

A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity.

ELSS FUND

Many mutual fund investors are hunting for the best Equity Linked Saving Scheme or ELSSs to save taxes under Section 80C of the Income Tax Act.

 

DEBT FUND

A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which the core holdings comprise fixed income investments.

SMALL CAP FUND

These mutual funds select stocks for investment from the small cap category, which includes all stocks except largest 250 stocks (by market capitalization).

BALANCED FUND

A balanced fund is a mutual fund that contains a stock component, a bond component and sometimes a money market component in a single portfolio.

LARGE CAP FUND

These mutual funds select stocks for investment from the largest 100 stocks listed in the Indian markets (highest market capitalization).

CAPITAL MARKET

A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.

Capital markets are composed of primary and secondary markets. The most common capital markets are the stock market and the bond market.

Capital markets seek to improve transactional efficiencies. These markets bring those who hold capital and those seeking capital together and provide a place where entities can exchange securities.

Mutual Funds

FIXED INCOME

Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year, and to repay the principal amount on maturity. Fixed-income securities can be contrasted with equity securities – often referred to as stocks and shares – that create no obligation to pay dividends or any other form of income.

In order for a company to grow its business, it often must raise money – for example, to finance an acquisition; to buy equipment or land; or to invest in new product development. The terms on which investors will finance the company will depend on the risk profile of the company. The company can give up equity by issuing stock, or can promise to pay regular interest and repay the principal on the loan (bonds or bank loans). Fixed-income securities also trade differently than equities.