A mutual fund is an investment fund, which is managed by professional investors where people can buy securities or bonds. These securities yield income over time. Many people don’t know about the working of mutual funds and hence are not ready to invest in it. But this situation is changing in these past few years has people have got awareness about mutual funds. The total investment assets under mutual funds stood at $40.4 trillion last year. The United States had most of these investments with an estimated $19 trillion invested there.
Types of mutual funds
There are different types of mutual fund in which people can invest.
- Open-Ended Funds: These are the most common type of mutual fund in which people are investing. These funds can be purchased or sold throughout the year. There is no limit on how much people can invest. It is managed in an active manner by a fund manager. The charges for these type of funds are generally higher as it is active throughout the year.
- Money Market Fund: This is a kind of short-term fund in which the securities are a form of government bonds or certificates of deposit etc. These are safer to invest but have a lesser return value.
- Fixed Income Funds: In fixed income funds, people can invest in government bonds, low & high yield corporate bonds. Here people can get a steady income for their investments on a regular basis.
- Equity Funds: In equity funds, people and companies invest in stocks. Here there is scope to earn income faster and higher than other types. But the risk factor is greater in this type. The various funds in this are large-cap stocks, mid-cap stocks, small-cap stocks.
- Balanced Funds: Balanced funds are a mixture of all other types of mutual fund. Here you can get higher income with a lesser risk factor. The investment is diversified across many bonds and shares.
Investment by Youngsters
The cost of living has increased and will continue to rise in the future. Hence it is important for today’s youngsters to have diverse investment options to have a bright future. Mutual funds are one of the best options for youngsters to invest. There are different types of mutual funds in which people can invest. Some of the factors that make youngsters invest in mutual funds are,
- Mutual funds are both short-term and long-term in nature. Hence youngsters can plan their investment based on their needs.
- Mutual funds are regulated by government bodies. Hence the investment made by youngsters is in much safer hands.
- People can invest and take their profit on a daily basis while investing in mutual funds. This is something youngsters will prefer.
- Some types of mutual funds are not taxed. Thus this is a good investment option as well as a way to save taxes.
- Mutual funds are not considered as a part of your wealth and do not come under wealth tax. Hence it is more profitable.
These are just a few of the many advantages of mutual funds. Hence youngsters can consider it as a good investment option for securing a good future.