Mutual Funds are considered a very good option in terms of investment. Despite being market-linked, a big fund can be created through this scheme.
There are many ways to invest in mutual funds like Debt Funds, Equity Funds and Hybrid Funds. If you are going to invest in mutual funds for the first time, then you should understand well about these methods of investment.
This information can be very useful for you.
Debt Funds
If you want to invest in mutual funds with very low risk and for a short period, then debt funds are considered a better option in this case.
In debt funds, the money taken from investors is invested in fixed-income securities like bonds, government securities, treasury bills non-convertible debentures etc.
That means the money of the debt fund is invested in a safe place. Debt funds are considered safer than equity.
There is no problem of liquidity in this. That means you can withdraw your money whenever you want.
Generally, debt funds have a fixed maturity date. Investors in debt funds should not expect high returns like equity.
There is a provision for tax on profits from Debt Funds.
Equity Funds
Equity Funds are also known as Stock Funds. In equity, your money is invested in stocks.
If there is a long-term investment plan then the investor is advised to invest in equity funds, because they can compensate for the losses incurred due to market volatility.
If equity funds are for long terms then they have the potential for higher returns as compared to debt funds.
However, there is a high possibility of negative returns if the market remains stable.
Hybrid Funds
A hybrid fund is a mutual fund scheme that invests in both equity and debt.
Many times the fund money is also invested in gold. If you want to avoid market risk then you can choose a hybrid fund.
Hybrid funds are also called balanced funds because they invest in both equity and debt instruments.
Investing in different asset classes provides the benefit of diversification.
Hybrid funds have the ability to withstand market fluctuations. According to experts, these funds give good returns.
