What Are The Different Types Of Mutual Funds Based On Investment Objectives?
Posted by Rajiv Manchanda on June 12th, 2019
In a mutual fund, the funds from different investors are pooled together and are invested in different investment vehicles. A mutual fund is a type of financial vehicle which is made up of funds collected from different investors to invest in securities like stocks, bonds, money market instruments or other assets. A mutual fund is operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for fund’s assets and attempt to generate capital gains or income for fund’s investors.
With the help of mutual funds, investors get access to professionally managed portfolios of equities, bonds or other securities. Every shareholder is a member of the group proportionately, in the gains or losses of the fund. So, when an investor buys a unit or share of a mutual fund, they are buying the performance of the portfolio or a part of the portfolio’s value.
Some of the types of mutual funds based on investment objectives are listed below:
- Aggressive growth funds: Aggressive growth funds have a higher chance of sudden growth and their values also rise up at a high speed. Investors also invest in aggressive growth funds with the objective of fetching great returns as the funds witness a sudden growth, the risk factor is high. It is because a fund with a sudden price appreciation potential ends up losing their value at a high speed at the time of downfall in the economy.
- Balanced funds: A balanced mutual fund is a mixture of income and growth funds that are known as balanced funds. The funds have a lot of goals to accomplish. The goal is to aim at providing the investors with the present income and at the same time, they offer the possibility of growth. The funds aim to accomplish different objectives which an investor looks forward to.
- Growth funds: A growth fund fetches a high return on investment. The investment portfolio comprises of a blend of small, medium and large sized corporations. A fund portfolio would include these to make an investment in a well-established and a stable corporation. A fund manager also invests a small proportion of their funds in a freshly set up small scale company.
- Money market mutual funds: A mutual fund strives on the maintenance of capital prevention. This is the reason why an investor who invests in these funds should take precaution. A money market mutual fund has the potential of yielding a high-interest rate as compared to bank deposits, interest rate, profits, one advantage of money market mutual funds are the risk factor involved is low.
- Income funds: Funds that normally make an investment in a range of fixed income securities are known as income funds. The funds ensure that the regular income for investors. Funds are also ideal for investors who are retired, as they have a regular supply of dividends. Fund managers invest in company fixed deposits. It is a stable investment option with a moderate risk factor.
