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MF - Basics

Mutual fund is a diversified investment. Which helps investors to invest as per their risk and Investment objective.

Following are the main categories of Mutual funds to understand them better.

Based on investment objectives

Equity/Growth Funds 
Equity/Growth funds invest a major part of its corpus in stocks and the investment objective of these funds is long-term capital growth. When you buy shares of an equity mutual fund, you effectively become a part owner of each of the securities in your fund’s portfolio. Equity funds invest minimum 65% of its corpus in equity and equity related securities. These funds may invest in a wide range of industries or focus on one or more industry sectors. These types of funds are suitable for investors with a long-term outlook and higher risk appetite. 
Debt/Income Funds 
Debt/ Income funds generally invest in securities such as bonds, corporate debentures, government securities (gilts) and money market instruments. These funds invest minimum 65% of its corpus in fixed income securities. By investing in debt instruments, these funds provide low risk and stable income to investors with preservation of capital. These funds tend to be less volatile than equity funds and produce regular income. These funds are suitable for investors whose main objective is safety of capital with moderate growth.
 
Balanced Funds 
Balanced funds invest in both equities and fixed income instruments in line with the pre-determined investment objective of the scheme. These funds provide both stability of returns and capital appreciation to investors. These funds with equal allocation to equities and fixed income securities are ideal for investors looking for a combination of income and moderate growth. They generally have an investment pattern of investing around 60% in Equity and 40% in Debt instruments. 
Money Market/ Liquid Funds
Money market/ Liquid funds invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit and Commercial Paper for a period of less than 91 days. The aim of Money Market /Liquid Funds is to provide easy liquidity, preservation of capital and moderate income. These funds are ideal for corporate and individual investors looking for moderate returns on their surplus funds. 
Gilt Funds
Gilt funds invest exclusively in government securities. Although these funds carry no credit risk, they are associated with interest rate risk. These funds are safer as they invest in government securities.

Read :- ABC of mutual funds

Team MF
Disclaimer: Sharekhan provides non-advisory / order execution services for Mutual Funds. Nothing in this constitutes investment advice or tax advice in any form and these products may or may not be suitable for you. Investors should make independent judgment taking into account specific investment objectives, financial situations and needs before taking any investment decision. Mutual fund investments are subject to market risk. Please read the offer document carefully before investing. Past performance may or may not be sustained in the future.

Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges, the Do’s & Don’ts and the T & C on www.sharekhan.com before investing. Investments in equity is subject to market risks. You are advised to carefully read the red herring prospectus of the company and go through all the Risk Factors mentioned in the offer document issued by the company before investing. The investment as mentioned in the document may not be suitable for all investors. Investors may take their own decisions based on their specific investment objectives and financial position and using such independent advisors, as they believe necessary.


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