Different Types of Mutual Funds : Part 1 - Franklin Templeton India

types

of

mutual

funds

part

one okay suppose you want to travel from Mumbai to New Delhi that's a long journey and so your travel agent gives you options of

different

modes of transportation that you can use to get there so he lays out the room time it takes and flexibility of each mode for you and now it's up to you to decide which mode suits your pocket diamond comfort the most well reaching your financial goal is pretty similar once you know your end goal how much time you have to

reach a goal what level of risk you're willing to take and what flexibility you design in terms of liquidity there are tons of ways to get there but obviously you want to find the most optimum and suitable option and the only way to do that is to understand the

different

types

of

mutual

funds

that are available in the market so let's break down the

different

types

of

mutual

fund schemes to simplify this if an investor's biggest concern is liquidity then it's best to consider

mutual

funds

as classified into two broad categories open-ended and closed-ended while the fund management principles in the two will be similar the operational feature of liquidity is

different

think about the way you save your money in your savings bank account you can deposit and withdraw any amount and the account stays active even after withdrawing some money on the other hand the fixed deposit account you open needs a certain amount to be invested for a certain period of time and you may

not be able to take a small amount out Midway without incurring a charge or in most cases terminating the same similarly the open-ended

mutual

fund is like a savings bank account and the closed-ended is like a fixed deposit exactly an investor can start investing in an open-ended

mutual

fund scheme by investing a minimum stipulated amount and opt for further transactions like additional investments redemption transfer etc any number of times making it as easy to operate as a savings bank account

a closed-ended fund in comparison operates like a fixed deposit making it much less liquid or convenient the scheme remains an operation for a certain period of time after which it matures and money's returned to the investor another difference between the two

types

of

funds

has to do with the way an investor buys and sells the two closed-ended

funds

have to be listed on the stock exchanges from where they are bought and sold also the market price of the units of closed-ended

funds

are

normally offered at a discount to the prevailing nav that's more because you're close and the fun units that can be sold only through the stock exchanges before its maturity you must do that in the d-mat format remember you may retain the right to hold the units in the account statement form however you won't be able to transact through stock exchanges only wait until the scheme's maturity but hold on there's a third type of

mutual

fund interval

funds

combined the features of

both open and closed and its schemes these

funds

are open for investment or redemption during predetermined intervals just like you would assess which mode of transport to choose for your journey depending on rigidity of your travel plan you can assess from the three

types

of

mutual

funds

here based on the liquidity what suits your objective better if liquidity is not the biggest concern on your plate there are more classifications of

mutual

funds

you can reference some go by the type of assets

they invest in such as debt or fixed income

funds

that invest in fixed income securities like Treasury bills government securities bonds and securitized debt there are equity

funds

that invest largely in equity shares or companies and equity related investments and then there are hybrid

funds

that are a mixture of debt and equity we have separate videos explaining in detail the

different

options available within these fund

types

and it doesn't stop here watch

part

2 of this video for more

types

of

mutual

funds

based on the way the schemes are managed and various other new-age

mutual

fund schemes it may seem like a lot but it's simpler than you think and understanding the

different

kinds of

mutual

funds

is key to choosing the right one for you we hope you've enjoyed watching this video watch more and we'll help you learn about

different

investing concepts you can also write to us with your feedback at editor'

templeton

dot-com

mutual

fund investments are subject to

market risks read all scheme related documents carefully