Choose The Type Of Mutual Funds That Suits You

Posted On Wednesday, May 24, 2017

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As an investor, you have many investment options like investment in shares, bonds, gold, property etc. When considering investment opportunities, the first challenge that almost every investor faces is a plethora of options. Every option presents its own set of challenges and benefits.

Investment in mutual fund is one of the most preferable options for various reasons. The foremost reason is professionalism. You may receive lot of noise when you are buying other assets mentioned at the start of this article however they may not bring professional advice. In case of investment in mutual fund, investors are provided with the services of an experienced fund manager who handles the financial decisions based on the performance and prospects available in the market to achieve the objectives of the mutual fund scheme, the advice backed by a dedicated research team. Above all, mutual funds are required to register with SEBI (Securities Exchange Board of India) which bring transparency and regulation in investment decisions. There are different types of funds available and investor can choose the best one as per his/her financial goals.

Types of mutual funds

Mutual funds are a one-stop shop for all your investment needs. Needs can range from wanting to purchase a car in the next one or two years or saving towards your child's future education in the next 10 years or saving up for your retirement, or saving tax on your regular income. Investors ideally look for diversification, low costs, ease and flexibility of withdrawal, better tax efficiency etc. Investors can achieve all their short term and long term financial goals through the following types of Mutual Funds.

1Equity funds: One of the most popular types of mutual fund are equity funds, where the fund manager invests in equity markets. Though it seems like a simple job, it is challenging and difficult. When to buy and sell shares is the most difficult decision which is based on the fund managers knowledge and experience.
2Liquid / Debt funds: Liquid funds are an integral part of the fixed income or debt investments plan, primarily investing your money in money market instruments like certificate of deposits, treasury bills, commercial paper and term deposits having maturity of up to 91 days. The lower maturity period of these underlying assets makes them liquid, which means they can be easily converted to cash at a short notice, with minimal risk on capital loss. Liquid funds are one of the most suitable investment options for investors who prefer liquidity (immediate availability of cash) over returns. While, return on investment is always an important factor, liquidity takes priority in the case of liquid funds. These instruments are not subject to interest rate volatility as against other debt funds with longer maturity periods. However, this does not entirely mean that they are immune to interest rate risks.
3Fund of Funds: According to Investopedia, a Fund of Funds (FOF) - also referred to as a multi-manager investment - is an investment strategy in which a fund invests in other types of funds. This strategy invests in a portfolio that contains different underlying assets instead of investing directly in bonds, stocks and other types of securities. The versatility offered by this fund is akin to a cricketer who is an all-rounder and is able to bat anywhere in the order. A Fund of Funds helps ease risk to a large extent by distributing investment across different funds. A Fund of Funds lowers the risk level of investments by investing fund in different kind of mutual funds. The taxation treatment of the fund is admittedly less than ideal. Broadly, equity and debt are the two major areas of investments in the mutual fund industry and both of them are taxed differently. All equity funds are in one tax bracket and all non-equity funds are in another tax bracket. Surprisingly, an equity fund of funds even one which has equity funds as a part of its portfolio - is taxed as a non-equity fund!
4Gold Funds: If you are thinking of making an investment in gold, then Gold ETF is the best option. Gold is also valuable as a bulwark against a falling currency. By investing in a gold fund, a retail or institutional investor can gain exposure to this asset without the hassle of taking delivery of physical gold assets, which is often required in the commodities market. Above all, gold has the highest liquidity after cash in hand.

As discussed in our earlier article, entry and exit from your investments should not depend on the market level. You can start investing in the market at any time and have patience till the time your financial goal is achieved. You need to spend time on selection of the right fund which will be based on your financial goal. Markets will remain volatile however there is no reason to worry if you are a long term investor.

Quantum Mutual Fund has 9 different funds in all categories including equity, gold, debt and fund of the funds. You can click here to know more about funds and click here to start investing in mutual funds.


Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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