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Types of Mutual Funds
Mutual funds can be categorized into various types based on their investment objectives, asset classes, risk profiles, and other characteristics. Here are some common types of mutual funds:
Equity Funds: These funds invest primarily in stocks or equities. They can further be categorized based on market capitalization (large-cap, mid-cap, small-cap), sector focus (technology, healthcare, energy), or investment style (growth, value, blend).
Debt Funds: Also known as fixed-income funds, these invest primarily in fixed-income securities such as government bonds, corporate bonds, treasury bills, etc. Debt funds vary in terms of duration, credit quality, and interest rate sensitivity.
Balanced/Hybrid Funds: These funds invest in a mix of equities and fixed-income securities, offering investors diversification across asset classes. They can be balanced based on predefined allocation ratios or dynamically managed based on market conditions.
Money Market Funds: These funds invest in short-term, highly liquid instruments like treasury bills, commercial paper, and certificates of deposit. They aim to provide stability of principal and easy access to cash.
Index Funds: These funds aim to replicate the performance of a specific market index, such as the S&P 500 or the NASDAQ. They typically have lower expense ratios compared to actively managed funds because they don't involve extensive research or stock picking.
