Mutual Funds Sahi Hai! - Investing in the Modern Era Explained

Why are mutual funds so popular? What are the different types of Mutual Funds? How can someone choose a mutual fund and start investing? 

In the next video Aritro will answer everything you need to know about Mutual Funds. 

As you heard, Mutual Funds have a VERY BIG catalog of products. 

Based on Maturity Date: 

• Open-ended funds – These funds don’t have a fixed maturity period, and allow investors to enter and redeem or exit at any point

• Closed-ended funds – These mutual funds have a fixed maturity date. Investors can start investing during a New Fund Offer or NFO period, and the investments are automatically redeemed on the maturity date

Based on Underlying Investments: 

1. Equity or growth funds: One of the most popular types of mutual funds, these are high-risk, high-return instruments where fund managers invest the investors’ money in the stock market in a wide range of stocks spanning across multiple sectors. These funds are further sub-divided into: Sector specific funds, Index funds and Tax saving funds     
2. Liquid funds: These funds are suitable for low-risk investors looking to invest their surplus funds for a short-term and are substitutes for deposits in bank savings accounts
3. Debt mutual funds: These funds invest a majority of the money in debt - fixed income i.e. fixed coupon bearing instruments like government securities, bonds, debentures, etc
4. Balanced funds: As the name suggests, these are mutual fund schemes that divide their investments between equity and debt. The allocation may keep changing based on market risks.

Based on Commission paid: 

1. Regular funds – These funds are recommended and sold by financial advisors, who earn commissions from the investors
2. Direct funds – These are zero-commission funds that are distributed through multiple financial platforms                               

Hope you now have a good understanding on Mutual Funds and how to choose the right one for you. 

In the next session, we will deep dive into the world of stock markets and learn the right ways to invest in shares.