Scope of Mutual Funds

November 23, 2010Mutual Fundsby EconomyWatch


Scope of Mutual Funds has grown enormously over the years. In the first age of mutual funds,when the investment management companies started to offer mutual funds, choices were few. Even though people invested their money in mutual funds as these funds offered them diversified investment option for the first time. By investing in these funds they were able to diversify their investment in common stocks, preferred stocks, bonds and other financial securities. At the same time they also enjoyed the advantage of liquidity. With Mutual Funds, they got the scope of easy access to their invested funds on requirement.

But, in todays world, Scope of Mutual Funds has become so wide, that people sometimes take long time to decide the mutual fund type, they are going to invest in. Several Investment Management Companies have emerged over the years who offer various types of Mutual Funds, each type carrying unique characteristics and different beneficial features.

To understand the broad scope of Mutual Funds we need to discuss the main types of Mutual Funds that are normally offered by the Mutual Companies.

The wide choices in Mutual Funds go as the following:

Equity Funds or Stock FundsThese types of Mutual Funds generally invest in stocks which are publicly traded. Amount of risk, involved with these funds vary according to different types of Equity Funds.
Types of Equity Funds are;

  1. Growth Funds-These funds invest in the stocks, which are under valued compared to their worth. As these stock prices tends to rise in future and carry good growth potential, Growth Funds go for these kind of stocks.
  2. Value Funds-These funds go for long term investment and aims at increase of value over the years.
  3. International Equity Funds-These funds invest in the stocks of foreign companies.

  4. Global Equity Funds-These funds invest in stocks of both the domestic market and the foreign markets.
  5. Sector Funds or Specialty Funds-These funds invest in specific sectors like Health care and in specific commodities like Gold.
  6. Index Funds-These funds reflect the performance of stock market indexes.

    Bond FundsThese funds invest in government bonds and corporate bonds. These Bond Funds offer a steady source of income and in many times these incomes get the advantage of Tax Exemption.

Money Market FundsThese funds invest in the money market. These funds involve low level of risk and promises comparatively low rate of return.

Balanced Fund These funds invest both in Stocks and Bonds and thus offer a well diversified investment portfolio.

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