5 must-have types of mutual funds for better returns

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There are various investment choices that you can get from mutual funds.

There are various investment choices that you can get from mutual funds. While some investments are based on maturity period, some are based on objectives. There are various types of investment funds in India from which you can get better returns. This guide will help you to know about them. The different types of mutual funds are:

Based on the maturity period

  1. Open-ended funds: The open-ended funds allow you the flexibility of time. You can contribute or redeem units at par with the NAV or Net Asset Value.
  2. Closed-ended funds: Closed-ended funds are just the opposite of open-ended funds. Unlike the latter, it doesn't have an endless time for investment. It has a stipulated time of about three to six years.
  3. Interval funds: Interval funds are a hybrid category of funds somewhere between closed-ended and open-ended funds. Though they operate as a close-ended fund, it is open for sale and redemption at certain intervals, from where it gets its name.

Based on the investment purpose

  1. Equity or growth funds: The money you put in equity funds is invested in stocks. Attaining growth in the capital for the long term is the primary motif of this fund. It is the most common type of fund in which people invest. These funds have their focus on more than one sector. For a long-term financial goal, then you can invest in this type of fund. You also need to bear the risk of investing.
  2. Debt or Income fund: This fund is suitable for those who don't want to take any type of risk. According to the functioning of this scheme, it invests mostly in bonds and certificates.
  3. Balanced funds: Balanced funds have their investments done in both equities and fixed income instruments. This type of mutual fund finances sixty percent on equity and forty percent on debentures and bonds.
  4. Liquid funds: Liquid funds mostly finance short-term pacts like treasury bills, deposit certificates, or commercial papers which have tenure of fewer than 92 days. Liquid funds are ideal for those who look for liquidity with capital preservation and reasonable income. An individual investor or a corporate investor looking for a rational return on a surplus fund can go for this type of investment.
  5. Gilt Fund: Gilt funds finances are for the government security schemes in a considerable amount. They are bereft of credit risk. Nevertheless, it has an interest rate risk. It is a risk that occurs with the rise or fall of the rate of interest. 
  6. Pension funds: Pension funds allow you to save for the life after your retirement. It assures that you have a surplus flow of money even if you don't do work. These plans have a functionality that is linked with both equity and debt funds. At times, besides public institutes, there are pension mutual funds operated by the government, unlike the gold fund in India.

So, you can invest as per your requirements.