Different Types of Mutual Funds : Part 1 - Franklin Templeton India
types
ofmutual
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 ofdifferent
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 toreach 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
ofmutual
funds
that are available in the market so let's break down thedifferent
types
ofmutual
fund schemes to simplify this if an investor's biggest concern is liquidity then it's best to considermutual
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 isdifferent
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 maynot 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-endedmutual
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 accounta 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
offunds
has to do with the way an investor buys and sells the two closed-endedfunds
have to be listed on the stock exchanges from where they are bought and sold also the market price of the units of closed-endedfunds
arenormally 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 intervalfunds
combined the features ofboth 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 threetypes
ofmutual
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 ofmutual
funds
you can reference some go by the type of assetsthey 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 equityfunds
that invest largely in equity shares or companies and equity related investments and then there are hybridfunds
that are a mixture of debt and equity we have separate videos explaining in detail thedifferent
options available within these fundtypes
and it doesn't stop here watchpart
2 of this video for moretypes
ofmutual
funds
based on the way the schemes are managed and various other new-agemutual
fund schemes it may seem like a lot but it's simpler than you think and understanding thedifferent
kinds ofmutual
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 aboutdifferent
investing concepts you can also write to us with your feedback at editor'templeton
dot-commutual
fund investments are subject tomarket risks read all scheme related documents carefully