Different Types of Mutual Fund Investment

Systematic investment plan or SIP can be defined as a strategy in which an investor has to make an investment of the same amount of sum for a certain mutual fund within a particular period of time. The investor can take part in the Stock market without timing them actively if they invest in SIP. With SIP you will be able to buy more units in case the market price rises and when the price falls, you can buy lesser units. SIP is profitable as it follows compound principles.

There are several types of mutual fund investments. Here is the detailed study.

  1. Funds of money market

The fund of the money market is generally involved with those types of mutual funds that are related to short-term investment which is based on fixed income securities like governmental bonds, commercial paper, acceptance of bankers, deposit certificates, and treasury bills. These types of mutual funds are safe but they have a lower level of return when compared to other funds.

  1. Funds of fixed income

Like that of government bonds, highly returned corporate bonds and investment-grade corporate bonds, these types of mutual fund investments are associated with investments that will return you a fixed rate. These types of SIP make sure that you invest on a regular basis so that money continues to come into the fund.

  1. Equity funds

These types of sip funds which make an investment in the Stock market are known as equity funds. When compared to fixed income funds or money market fund, equity funds generate a huge rate of return amount. There are many types of equity funds like growth stocks, income funds, mid-career stocks, large-scale stock and small-scale stocks.

  1. Balanced funds

Investment when made of combining the fixed income security and equities then it is known as balanced funds. The balancing process of higher return against greater risk is involved in this system. The money is divided into various types of investments in case of balanced funds. In case of aggressive funds there is the number of equities and a lesser number of bonds and for conservative funds, there are more bonds compared to equities.

  1. The index funds

In order to keep track of the performance of a particular index, these types of mutual funds are used. They are involved with lower costs for the mutual funds which are actively managed. Active management is defined as the pieces in which the buying and selling of investment are done by the portfolio manager.

  1. Specialty funds

When funds generally focus on mandates like commodities, real estate and investment related to social responsibilities then it is called specialty fund. If we take an example, the socially responsible investment funds for companies which support human rights and diversity, environmental stewardship, and it generally avoids companies dealing in tobacco, gambling, alcohol and the military and weapons.

  1. Fund of funds

These types of sip make an investment in other-other funds. These types of funds create an easier allocation of asset and diversification for investors. Also in case of MER, it is higher in case of this type of mutual fund.

Try out our SIP Calculator to check SIP return on investment for specific period.