May 08, 2023
The four main areas of mutual funds,
Equity Funds: Equity funds invest in stocks or shares of publicly traded companies. They aim to provide capital appreciation over the long term by building a diversified portfolio of stocks across different sectors and market capitalizations. Equity funds carry a higher level of risk due to the volatility of the stock market.
Fixed Income Funds: Fixed income funds invest in fixed-income securities such as government bonds, corporate bonds, and other debt instruments. These funds focus on generating income for investors through regular interest payments and the potential for capital appreciation. Fixed income funds generally carry lower risk compared to equity funds but offer lower potential returns.
Money Market Funds: Money market funds invest in short-term, low-risk instruments like Treasury bills, commercial paper, and certificates of deposit. They aim to preserve capital and provide liquidity rather than generating significant returns. Money market funds are popular among investors seeking stability and easy access to their funds.
Hybrid or Balanced Funds: Hybrid funds, also known as balanced funds, invest in a combination of both stocks and bonds. These funds seek to provide a balance between capital appreciation and income generation. The asset allocation between equities and fixed-income securities may vary based on the funds objectives. Hybrid funds offer diversification benefits and cater to investors seeking a mix of growth and stability in their portfolio.