What Are Genuine Mutual Funds for Extraordinary Premium?
Before investing in mutual funds various questions come to the mind of people. Such as what are high returns and stable mutual funds schemes that exist in the market? How much risk and return they involve? What is the standard time period for which funds must be invested? What is the investment mix of various funds in the market?
Every individual wishes to earn some extra money which they can save to meet their future expenses. Some common examples are marriage, medical bills, purchase of a house, paying off debts, education abroad etc. The invention of various kinds of mutual funds schemes evolved from these needs. Now there are more than 30 mutual funds schemes that provide attractive returns to their investors which allows them to accomplish their future plans.
Below are some most prevalent schemes that guide investors about various funds. And after reading them many confusion related to investment in diversified mutual fund schemes will be resolved.
1. Liquid Funds
Under this scheme, the investment is made majorly in liquid instruments in the money market with the maturity of 91 days. Investors get higher returns in this scheme as compared to bank deposits. Therefore, investors can invest their funds for a few days to a few months. Withdrawal of funds under this scheme is restricted up to seven days from the date of investment made.
2. Money Market Funds
The investment made under this scheme is in capital market instruments whose maturity is up to 1 year. Investors usually get a reasonable return and good liquidity therein. Money market mutual funds schemes used to invest in money market instruments which are rated high quality and have precise structure.
3. Low interval funds
Low interval funds are also known as debt funds, that invest in short-term debt securities with maturity duration between six to twelve months. These are open-ended schemes suitable for investors who wish to park their funds for up to 1 year to generate decent returns.
4. Short Interval Funds
Short interval funds are also debt funds like Low duration funds that invest for a period of one to three years in open-ended debt schemes. Premium under this scheme mainly depends upon the market movement. Here investment should be made by intermediate level investors.
5. Medium Interval Funds
Medium interval funds occupy more risk as compared to short-duration funds. The high-interest rate being offered on debt securities has a great influence on returns in this scheme. Investments in this fund are pooled in medium-term open-ended debt schemes. The term of investment is for three or more years.
6. Long Interval Funds
Long Interval funds have a maturity period of 7-10 years and invest majorly in debt instruments. These are best suited for investors who have a high-risk appetite and skillfully understand the calculation of interest rate fluctuations. When the interest rate of these instruments increases it results in a lower return on investment. Hence high returns can only be expected when interest rates are slightly low.
7. Floater Funds
In the Floater fund, the investment is made in floating-rate instruments of approximately 65% of their total floater fund assets. Returns under these funds majorly depend on fluctuations in interest rate. Investment under these schemes is polled in open-ended debt securities, to generate good returns.
8. Gilt Funds
Gilt funds invest their 80% of funds into government securities. The risk level is moderate in these funds as the ownership and control of such companies are backed by the government. Moreover, government companies are considered safe for investment because they have strong financial support which makes them stable and reliable.
9. Corporate Bond Funds
Corporate bond fund managers strategically invest a major part of their funds in high rated corporate bonds. These bonds bear a low risk and are considered safer in view of investment in the security market. Investors who wish to invest a lump-sum amount of money generally prefer this scheme.
10. Credit Risk Funds
The investments made by credit risk fund managers are in below higher-rated commercial paper. These funds invest a minimum of 65% of their corpus below AA- rated papers. This scheme is considered risky because the investment is made below the high rated instruments which bear a substantial risk of default. Moreover, these investments have the capacity to deliver high returns after attaining their maturity.
Schemes are generally designed as per the investor's suitability. There are schemes for each and every type of investors who can invest according to their risk appetite and corpus. Anyone can earn some attractive returns on their funds by investing them smartly and carefully. Investors are advised to check past performance of the funds before investing in them and monitor the funds status on a regular basis. Hope this article is guided about various types of funds and their characteristics.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Prateek Jain