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Investing in a mutual fund: Types of funds and return on investmentsBY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-08-08
Investment in a mutual fund is one of the most important methods of investment. This is very easy for a lay person too because there is very less ground work to be done when compared to investing directly in the equity markets. In spite of this, there are a few important things that a person has to know to invest in the mutual fund. There are different types of mutual funds. They are listed and explained below. 1. Growth funds: In these funds, the growth of the money invested is given higher priority. The growth can be either very high or less depending on the place where the money is invested. It also depends on the risk appetite of the mutual fund manager. These growth funds are typically invested in high risk equities where the return may be very high, but the risk of the loss of the capital or the initial investment is also very high. 2. Income funds: In these funds, the mutual fund offers a regular income for the individual who has invested. These funds have the money invested in mainly equities that have lesser risk. This is to gain a regular income that can be distributed to the investors. This is a better investment for people who are averse to taking risks, but also would like to invest in the equity markets. 3. Balanced funds: Ina balanced mutual fund, the fund manager invests in various equities and also in some fixed low return guaranteed return investments. This helps the fund to be balanced between a high risk and low risk investment. There is a balance in the risk and also in the return. This is highly recommended for people who are very apprehensive of investing in a mutual fund or the equity market. 4. Money Market Funds: The mutual fund that runs this fund invests the money from his fund into the money markets. There are various methods of investing the money. Part of the money is kept as cash to invest in times of sudden drop in the equity market. Here the return can be moderate. 5. Industry fund: In this type of mutual fund, the investment is very highly specific. There are various industry specific funds. Some examples are Oil and Gas funds, infrastructure funds and banking funds. As the name implies, these funds invest the money in specific funds. This gives returns specific to the growth of the industry. There is a high risk because of the lack of diversification. 6. Index Funds: These mutual funds are based on the index itself. There are various indices available around the world. Each country itself may have more than one index. So the mutual fund is based on the index of the country. The return is usually assured, because the index usually grows consistently over a period of years. The return is usually around twenty percent every year. The only risk is that in times of recession, there may be a decrease or negative return on the investment. Mutual funds are very good investment options for people who do not have time to track the equity market and also for those who do not understand the equity markets. The return on investment depends on the fund selected and the track record of the fund manager. Article Source: http://www.saching.com About Author / Additional Info: I am a physiotherapist by profession. A writer by interest. I take up freelance assignments for various websites and blogs. Comments are welcome at prakashdavid@rediffmail.com Additional Articles: * China's one child policy and birth rate: China Baby Boomer problem. * Play on Staffing process * Astronomy For Dummies - Astronomy For Beginners * Teen Pregnancy And How -To Reclaim Your Life * Methods to save money by smart shopping Does this article violate or infringe on your copyright ? It is a violation of our terms for authors to submit content which they did not write and claim it as their own. If this article infringes on your copyrights, then use our Contact us form with the detailed proof of infringement along with the offending article's title, URL and writer name. If you do not hear back from us then contact us again in another 10 days. Thank you. Comments on this article: (0 comments so far) * Additional comments are now closed for this article *
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