What is a Mutual Fund and its Types – HowFlux

What is a Mutual Fund and its Types

mutual fund


The mutual fund can be understood as  A mode to invest that is made up of a group of funds collected from many people who invest in order to invest in securities such as stocks, bonds, capital market instruments and all other similar assets.
Mutual funds are run usually by capital managers, who invest the fund’s capital and try their best to bring out the capital profits and earning for the fund’s investors. A mutual fund’s portfolio is structured and preserved to match up the objectives of the investment stated in its brochure.

What Is A Mutual Fund And Types of Mutual Fund

What Is A Mutual Fund And Types of Mutual Fund

Mutual funds usually exist in the form of Trusts what we usually call Asset Management Company  that regulates the  pool of capital gathered from different people who invest for investment in various classes of assets to reach various financial aims.  or in other words, Mutual Fund is nothing but the trusts which  pool up the savings of a large number of people who invest and then reinvest those funds for earning the gains and then divide the dividend among the people who invest.

In return for such services,  Asset Management Companies charge a negligible amount of fees. each & Every Mutual Fund / launches different plans, each with a specific objective.  people who invest and share the same aim invests in that particular Scheme. Each Mutual Fund Scheme is  administrated by a Fund Manager with the help of his crew of professionals, One Fund Manage may be managing more than one scheme also.

The Mutual Funds usually keep on investing their funds in equities, bonds, debentures & call money etc. Depending on the objectives and terms of scheme floated by the Mutual Fund, Now a days there are Mutual Funds which even invest in gold or other asset classes.

Types of Mutual Funds

From the perspective of investment type:-

when mutual fund launches a new scheme, it is believed to declare in the brochure the kind of gadgets in which it will make investments of the funds collected under that scheme.
Thus, the various kinds of Mutual Fund schemes as indexed in accordance to the type of investments are as follows :- equity funds or scheme, debt funds or schemes or income funds, diversified funds or schemes or balanced funds, gilt funds or schemes, money market funds or schemes, sector specific funds, index funds, income funds and balanced funds.

In accordance to the time of closure of the scheme:-

when mutual fund launches new schemes , , it also declares whether this will be an open ended scheme or there is a closing date when finally the scheme will be turned.  thus, in accordance to the time of closure schemes can be classified as open ended schemes & close ended schemes.

In accordance to the Tax incentive Schemes:-

Mutual Funds are even permitted to float some tax saving schemes. therefore, sometimes the schemes are classified in accordance to it also as  tax saving funds & not tax saving funds.

In accordance to the time of payout:

Sometimes Mutual Fund schemes are indexed in accordance to the period of the pay outs.  the categories are as dividend paying schemes & reinvestment schemes.


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