Classification or Types of Mutual Funds
A. Equity mutual funds-
In these funds, the money should be invested in stock markets and we must take a longer-term horizon like above 5 to 7 years for this category. Higher volatility will be there in these funds. Money can go negative sometimes in a short-term period. So must take advice from an expert before investing. In Equity funds, the average returns will be decent over a period of 10 yrs time. These funds can beat inflation by a decent margin over the long term and they are tax-efficient as well as 15% tax if sold before 365 days and 10% tax if sold after the same time period with 1-lakh profit exempt from tax. One must take allocation in this category for wealth creation and fulfill long-term goals like child education, retirement, etc.
B. Fixed income funds–
These funds are a must in everybody’s portfolio to provide security and can use money in any kind of emergencies in a short period. There are majorly 3 types of debt funds.
1. Liquid funds-
These are used to park money for very short periods like any time money.
2. Short-term funds-
These are used to pull up money for 6 months to 2 years time frame.
3. Long term funds-
These can be used to station money for above 3 yrs perspectives.
These are generally called as debt funds or fixed maturity plans. This category is very less volatile returns are more or less like a fixed deposit. But the taxation part is quite attractive than fixed deposits. Debt funds have their own pros and cons. Please consult before investing in fixed-income options.
C. Gold saving funds-
Where the money is invested in paper gold and it fluctuates with the gold price movement on a daily basis. One should take some allocation in it for diversification. The best benefit of the gold fund is one should need not to worry about the purity of gold and no worry about any security or theft.
D. Asset allocation funds-
These types of funds now days are really in favor of their composition. These are basically mixed of equity and debt options and it changes according to the market condition.
Hope this Information will solve all your queries and helps you think clearly about your future needs and requirements. How much money you should need to invest monthly to meet your goal in the future.
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