February 2018
Mutual funds 

It is very general in today’s world that many people are earning good amount of money and they want to save some for the future . Even if someone is not earning a great amount of money even though they want to invest somewhere so that they can save something for there future and MUTUAL FUNDS are one of the many options that people can use to yield some more.

What is Mutual fund?

A Mutual fund is a professionally managed investmet scheme usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds and other securities.

Note: What is a 'Bond' A bond is a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a                                                                  variable or fixed interest rate.

 As an investor we can buy mutual funds which basically represents our share of holding in a particular scheme. These can be purchased or redeemed as needed  at net present value . All the mutual funds are registered under SEBI( SECURITY EXCHANGE BOARD OF INDIA)

The biggest advantage of investing through a mutual fund is that it gives small investors access to professionally-managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital. 

Types of mutual funds:

•  Money market funds: The money market consists of safe (risk free) short-term debt instruments, mostly government Treasury bills. This is a safe place to park your money. You won't get substantial returns, but you won't have to worry about losing your principal. A typical return is a little more than the amount you would earn in a regular checking or savings account and a little less than the average certificate of deposit.

• Income funds:Income funds are named for their purpose: to provide current income on a steady basis. These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity in order to provide interest streams. While fund holdings may appreciate in value, the primary objective of these funds is to provide a steady cash flow ​ to investors. As such, the audience for these funds consists of conservative investors and retirees. Because they produce regular income, tax conscious investors may want to avoid these funds. 

• Balanced funds:The objective of these funds is to provide a balanced mixture of safety, income and capital appreciation. The strategy of balanced funds is to invest in a portfolio of both fixed income and equities. A typical balanced fund will have a weighting of 60% equity and 40% fixed income. The weighting might also be restricted to a specified maximum or minimum for each asset class, so that if stock values increase much more than bonds, the portfolio manager will automatically rebalance the portfolio back to 60/40 . 
  
  Equity funds:Funds that invest primarily in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth. There are, however, many different types of equity funds because there are many different types of equities.
  
  Specialty funds
  

  1. Sector funds:these are targeted strategy funds aimed at specific sectors of the economy such as financial, technology, health, and so on. Sector funds can therefore be extremely volatile since the stocks in a given sector tend to be highly correlated with each other. There is a greater possibility for large gains, but also a sector may collapse.
  2. Regional funds:this make it easier to focus on a specific geographic area of the world. This can mean focusing on a broader region (say Latin America) or an individual country (for example, only Brazil). An advantage of these funds is that they make it easier to buy stock in foreign countries, which can otherwise be difficult and expensive. Just like for sector funds, you have to accept the high risk of loss, which occurs if the region goes into a bad recession
  3. Socially-responsible funds:invest only in companies that meet the criteria of certain guidelines or beliefs. For example, some socially responsible funds do not invest in “sin” industries such as tobacco, alcoholic beverages, weapons or nuclear power. The idea is to get competitive performance while still maintaining a healthy conscience. Other such funds invest primarily in green technology such as solar and wind power or recycling.
  4.   Index funds:

     are passively managed funds that seek to replicate the performance of a broad market index such as the S&P 500 or Dow Jones Industrial Average (DJIA). An investor might consider an index fund if they subscribe to the logic that most active portfolio managers cannot beat the market on a regular basis. Since an index fund merely replicates the market return it also benefits investors in the form of low fees. Index funds have been increasing in popularity since Vanguard pioneered the way for passive indexing in mutual fund form.