MUTUAL FUNDS Explanation....Learn Everything On Investment

 Every month when your salary id credited then you keep some part of that salary as savings. you keep some money for your later use, maybe for emergency or if you want to be the house, or car and you save for that.

So what are the way to save. one simple way is that you keep your salary as it is in the bank and it gets collected. It's a very bad way , because such a money loses their value and inflation is increasing in our country and due to that the price of the commodities are increasing to.so, the value of your money keeps decreasing every year by 4-5 percent according to the inflation rate. people invest the money so that they don't lose their value kept just lying. there are different places to invest. our country has mainly 4 places for investment.

• Saving Account
• FD or Fixed Deposit
• Gold or jewellery
• Real Estate

Some people who wants to take more risk also invests in stock market which is another way to invest your money. Every investment has 3 things, Return, risk and time.

What are mutual funds

Mutual funds is a special kind of investment through which you can invest on different types together. You can do a diversifies investment by investing at one place. Asset management company starts mutual funds. Basically you give your money to Asset Management Company and many people like you do so and that company invest all the money collectively at different places. They have appointed experts and with their suggestion they invest the money.

They invest money at different places and the return rate they get collectively from these different places out of that some small percent of 1-2 is kept as a profit by the Asset company and the rest you get back as per that return rate. all the companies starts different kinds of mutual funds in large numbers for example ICICI has started more than 1200 mutual funds. So how risky is your mutual funds and what is the return depends on the mutual funds that you are investing in. mutual funds can gives the return rate of 4 percent and also of more than 30 percent too. It can be of zero risk and also of high risk to because all this depends on where the Asset management company is investing your money. if that company is investing on stocks then it will be more risky and you will get more returns and if it's investing in the government bonds then it will be less risky.

Types of Mutual Funds

Different types of mutual funds depends on the basis of the investment done by AMC people. we can divide this in the 3 categories: Equity mutual funds, Debt mutual funds and hybrid mutual funds. In equity mutual funds, your money will be invested in the stock market. So naturally in this type of mutual funds generally the risk is more and also the return. In the stock market on which kind of company are you investing, if it's a big company then it's called as Large cap Equity Funds and if it's small company then it's called as Small cap and in the same way Mid cap equity funds. Big company doesn't have much risk as compared to the smaller ones but big companies won't have growth rate as high as it can be for the smaller companies. So risk and return both are less in the big companies. ICICI prudential blue chip fund is an example of a large cap equity fund. If you invest here for a year then after a year your expected return is of 11.3 percent but you invest for 5 years then you expected return can be of 19.7 percent.

Next let's look at the second category of the mutual funds, that is Debt mutual funds.these are those mutual funds which are invested on the debt instruments. Debts instruments are bonds, debenture, certificates of deposits.

Types of debt Mutual Funds

Now lets look at the second category of the mutual funds friends, that is Debt Mutual Funds.  These are those mutual funds which are invested on the debt instruments. Debts instruments are bonds, debenture, certificate of deposits now these things are exactly what you can read it for yourselves. Sometimes if the government needs money and it's not getting that through the budget then the government borrows money from the people and take loans from the people, it is called as bonds. you can invest here, give to the government and the government will return you the money after a fixed interest. Now debt mutual funds are of various kinds, let's first talk about liquid funds.

Liquid Funds: are those mutual funds which can be easily and quickly converted in to cash. Liquid means that actually, it's not the liquid to drink.In economics liquid is something which can easily converted into cash. So this thing can be converted into cash within a day or two But is has a very low risk, such low that you can basically consider this as an alternative to saving account.

Gilt funds:These are those funds where investments are done on the government issued bonds So technically it has zero risk because it's never possible for the government to not return your money But mostly the interest rate can fluctuate.

Fixed Maturity:It can be considered as an alternative to fixed deposits, FD because it has very low risk just like FD and it is done for a fixed time. for a specific time investment is done here and you can't take the money before that. 

What are Hybrid Mutual Funds

Basically its a mixture of a Debt and Equity mutual funds. some people wants to invest in the stock market but don't want to invest all the money there and also invest some amount in the debt instruments., so hybrid mutual funds are for them.