A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment company in the UK.
Are there different types of equity funds available?
There are several equity funds that cater to the various needs of investors. The overall goal of all is to generate appreciation for long periods.
To understand this better, let’s take a look at the contingent we send to the Olympic Games. There is a large group of players, and then there are teams for various sports. One of the main events of the Olympic Games is the “track and field” event. We also send a group for these events. Inside, there are a few races, from a 100-meter sprint to long-distance races, including the marathon. Even if the entire contingent went to compete at the Olympic Games, there would be several players with different strengths.
The same applies to mutual funds. If all Common Fund schemes are equivalent to the entire Olympic contingent, equity funds may be similar to one group within it, participating in various athletics events. As we have seen, there are various subcategories within the track and field as well, likewise, there are different patterns within equity funds.
