Mutual Fund is a pool of money that is collected from a group of investors for investing in securities for instance stocks, bonds, money market instruments etc. The funds are allocated by professional money managers in order to make capital gains. The investment objectives are matched and structured according to personal portfolios.
When you buy a share of a mutual fund, you are actually buying the performance of its portfolio. Evidently the value of the mutual fund company is a direct consequence of the performance of the securities it decides to buy.
A Mutual Fund Scheme where the investible funds are invested in equity shares and equity related instruments in domestic companies. Equity mutual funds are principally categorized according to company size, the investment style of the holdings in the portfolio.
The size of an equity fund is determined by a market capitalization, while the investment style, reflected in the funds stock holdings, is also used to categorize equity mutual funds.
Hybrid Funds also known as Balanced Fund invested in both equity and debt (fixed income instruments). A portfolio is created according to the objectives of the schemes and funds are allocated in equity. The assets can be bought or sold in accordance with movements of the market.
Debt funds are mutual funds that invest in fixed interest-earning instruments such as treasury bills and certificate of deposits. The main objective of a debt fund is to accumulate wealth by means of interest income and steady appreciation of the fund value. The underlying securities generate a fixed rate of interest throughout the tenure. The fund manager of a debt fund invests in the underlying securities based on their respective credit ratings. A higher credit rating indicates that debt security has a higher chance of paying interest regularly along with the repayment of the principal upon expiry of the investment tenure.