A mutual fund is a professionally managed company that collects the money of many investors and invests it in securities such as stocks, bonds and short-term debts, equity or bond funds, and money market funds.
Mutual funds are a good investment for investors who want to diversify their portfolio. Instead of focusing everything on one company or sector, a mutual fund invests in different securities to try to minimize portfolio risk
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The term is typically used in the United States, Canada, and India, while similar structures around the world include the SICAV in Europe and the open-type investment firm in the United Kingdom.
Debt funds provide lower but relatively stable returns than equity funds. They provide stability to a portfolio as they trade in the fixed income market, which is more stable than the stock market that affects equity funds. Everyone needs a financial plan designed to meet various financial goals in the future, such as children’s college education, medical expenses, housing, retirement, etc. We invest our money in different assets such as property, gold, stocks, mutual funds to achieve different financial goals that arise at different points in our lives
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Debt funds are better suited for objectives that are short-term in nature, as opposed to equity funds suited to long-term objectives such as retirement planning, given their volatile short-term nature. Some debt funds such as Liquid Mutual Funds are suitable for parking your money for a few months if you have received a bonus or sold some other investment and are deciding what to do with the money. Debt funds are also suitable for goals where you don’t want to run the risk of not achieving them, such as the money from university education that you want to withdraw in 2 years. You can invest your money in a fixed income fund for these types of goals. Therefore, debt funds should be part of every financial plan.
