Mutual Fund Basics

Mutual Fund is a pool of money, collected from investors, and is invested according to certain investment objectives. A mutual fund holds a variety of investments which can make it easier for investors to diversify than through ownership of individual stocks or bonds.

Features of Mutual Funds:

1) Portfolio Diversification

2) Professional Management

3) Affordability with SIP

4) Liquidity

5) Transparency

6) Rupee Cost Averaging

7) Consistent Savings

8) Choice of Investment

Types of Mutual Funds based on structure,

1) Open ended Funds: Mutual fund houses trade units of mutual funds at NAV (Net Asset Value). Investors have the flexibility to buy or sell any part of their investment at any time.

2) Close ended Funds: These funds begin with a fixed corpus and operate for a fixed duration. Investors cannot enter nor exit from the scheme till the term of the scheme ends.

3) Interval Funds: The funds which have a features-mix of open-ended and closed-ended are called interval funds. Interval funds are closed funds with an option to transact funds directly for a certain pre-decided period.