Mutual Funds: Money Wise be Wise

Mutual Funds are a very important financial instrument and a comprehensive portfolio of stock market shares that are built with funds from small and mid level investors whose primary concern is to make a safe investment for the capital. Mutual Funds are usually run by government trusts, banks, and some prominent private financial institutions.

Mutual funds are of different kind namely growth funds, income funds, balance funds and liquid asset funds. In financial terms, liquid asset funds also known as Money Market Funds. The mutual fund schemes could be classifieds into two schemes. The first one is open ended and other one is close ended. Both these schemes depend upon the respective maturity period. The closed- ended mutual fund enjoys a fixed maturity period of around 5-7 years in a single stretch. The subscriptions for this fund usually open during a specified time period. The potential investors for this kind of mutual funds may invest in this scheme on the time of IPO and later they can buy the units from any of the stock market where the units are properly listed.

Some close-ended funds provide an opportunity of selling back of the units in order to provide an exit route to the investors. This selling back of the units is taken place by periodic repurchase at NAV related prices at stock market. An open-ended mutual fund is available on continues basis and available for subscription and repurchase option. These funds don't offer any fixed maturity period and the investors may buy and sell units at Net Asset Value (NAV) related prices at their own convenience. Liquidity is the key feature of the open-ended mutual fund schemes.

Another sort of mutual fund scheme is growth / equity oriented scheme. These kinds of funds are meant to provide capital appreciation for short or long period. These funds comparatively carry high risk factors and offer different options like dividend option, capital appreciation to the investors. Index funds are another kind of mutual fund schemes that replicate the portfolio of a particular index like BSE sensitive index and Nifty.

Another fund called gilt fund is basically to invest in government securities that has no default risk at all. These schemes sometimes fluctuate due to change in interest rates and other economic factors in global marketplace.