It's a trust that gathers funds from several investors with similar investment goals. After that, the funds are invested in bonds, stocks, money market instruments, and/or other securities. Units are owned by each investor and constitute a portion of the fund's holdings.
The net asset value, or NAV, of a scheme is used to calculate the proportionate distribution of income among the investors following the deduction of specific expenses. To put it briefly, a mutual fund is one of the best ways for the average person to invest since it provides a reasonably priced way to purchase a professionally managed, diversified basket of securities.
Equity Mutual Funds
They primarily invest in stocks, or the shares of businesses. The creation of wealth, or capital appreciation, is the main goal. They are the best for long-term investments and have the potential to yield larger returns.
Examples include large-cap funds, which primarily invest in businesses that manage sizable, well-established enterprises.
Mid-sized business investments are made by mid-cap funds. funds that make mid-sized company investments.
Funds known as "Small Cap" that make investments in smaller enterprises or businesses
Multi-cap funds make investments in a range of small, mid-, and large-sized businesses.
Sector funds are investments made in businesses within a certain industry. For instance, technology funds that solely make investments in tech firms.
ELSS Funds
Under Section 80C of the Income Tax Act of 1961, an individual or HUF may deduct up to Rs. 1.5 lacs from their total income through the use of an equity-linked savings scheme (ELSS).
In other words, if an investor invested Rs. 50,000 in an ELSS, the individual's tax burden would be reduced because the amount would be subtracted from the individual's total taxable income.
Fixed Income Funds
These make investments in money market instruments like Treasury Bills and commercial paper, as well as fixed income securities like government securities or bonds, commercial papers and debentures, bank certificates of deposit, etc.
These investments are appropriate for income generation and are comparatively safer.
Liquid funds, short-term, floating-rate bonds, corporate debt, dynamic bonds, gilt funds, etc. are a few examples.
Hybrid Funds
These offer the best of both, growth potential and income generation—because they invest in both fixed income and stocks. Pension plans, child plans, monthly income plans, aggressive and conservatively balanced funds, and so on are a few examples.
Note: Investments are subject to market risks; read all scheme related documents carefully.
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