Mutual Fund India Facts - Four Rules for a Profitable Investment Portfolio
Mutual funds are presently available with investment objective of almost all asset classes. You have basically three kinds of mutual funds, i.e., equity funds, income (debt) fund, and liquid funds.
Equity funds are best for long-term investment with high-risk profile. This type is sub divided on two bases, one is capitalization basis, i.e., large cap, mid cap, small cap and now a new category micro cap. Another basis is sector exposure, i.e. diversified, which invests in almost all sectors, and definitely exposure is different.
For opportunity fund investing, invest predominantly in 3 to 8 sectors as per market return, then try to benefit from market prospective, then comes sector fund definitely investing in one sector.
Now comes income funds and these are also subdivided in long-term debt funds investing in long-term debt instrument, short-term debt funds, and fixed maturity debt funds.
Then comes liquid funds and these are for investing in very short maturity debt instrument, short lending, overnight lending, etc. and these are no risk funds.
One mix kind of fund type is also popular and that is balanced fund where we invest in all three-asset classes, i.e., balanced funds, pension plan, child care funds and MIP are a type of balanced funds with different exposure.
We presently see some more kind of funds, i.e., commodity funds and gold funds and in future more commodity will come in this space.
Reality fund presently is for high net worth people, derivative funds (use of hedging instruments), etc.
Least but not last, for an investor in my views, the most important is your financial plan, risk appetite, asset allocation first, and then investment.