Mutual Funds – Understanding Their Types


Mutual Funds - Understanding Their Types

There is a variety of funds that you can pick up to manage your mutual fund’s portfolio. While the traditional types like the equity, debt, and bonds are always there and will be, You need to know the latest and more advanced combination of funds available in the market. This will help you create a portfolio of a basket of funds that can get high returns as well as security for your future. How do you learn about these? Read more to find out how and follow these simple tips to implement. 

Mutual Funds - Understanding Their Types
Mutual Funds – Understanding Their Types

Balanced Funds

A mixed percentage of investments between shares and bonds are also called as balanced funds. The balance is about 60%-40%. The former leaning towards equity. The best feature of these types of funds is that you can switch the percentage allocation from equity to bonds as you move closer to your retirement. This makes these funds more secure and available when you need it the most. Though the rate of return can keep wavering between an equity standard to a bond standard, this is a good mix of funds that people in the middle ages can choose. It will give you fair returns and also help you save for your retirement. 

Index Funds Are Unique Mutual Funds

When funds are linked to a particular market index like S&P ratings or other similar ratings, they are called index funds. This is because investors now see these ratings as an authentic reflection of an industry or company’s performance and hence if the rating is high, the possibility of higher returns is also equal. Like the equity fund, these funds can also wary in size, style, and location. Ensure that you read all the aspects of these funds carefully before taking the plunge. Sometimes it can get pretty confusing. You will also be depending on an agency that credit rates companies. 

Alternate Funds

This is a one-word-fits all category. Anything that does not fit into the above two categories is considered ‘Alternate’. This can include hedge, managed, futures, commodities, and many others. It can also include real estate investment trusts as a part of the fund. Recently there is a growing preference for corporate social responsibility as a fund and how people manage this. Only time will tell how this category shapes up. The returns in this sector can be varied and have a mix of fixed income and high returns. 

Mutual Funds - Understanding Their Types
Mutual Funds – Understanding Their Types

Irrespective of the type of mutual funds you choose to invest in, make sure you talk to a specialist or a consultant before starting to invest. You may not understand the market, industry, or the growth aspects. A specialist will be able to give you authentic and accurate information. Also decide on the way of investing in a mutual fund. Remember if you are in for the quick money, this may not be the best model for you. This kind of investing is for the long duration. You will be better off planning for your retirement in this model than paying your current bills. Always check the red herring prospectus before investing in any of such things.

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