Types of Mutual Funds based on asset class
Equity funds: This type of fund is invested in shares or equity stocks of a company. It is one of the most popular types of MFs as they provide investors with a chance to earn higher returns. However, the risk associated with these funds is comparatively higher.
Debt funds: Debt mutual funds invest in fixed income securities such as government bonds, corporate bonds and other debt instruments. These are suitable for investors who want to reduce their risk by investing in safer investments.
Balanced or Hybrid funds: Hybrid mutual funds are a combination of equity and debt funds. The investors invest in both equity and debt instruments to get returns that are good enough to meet goals while reducing risk. Hybrid mutual funds are a good option for investors who want to balance risk and reward.
Money Market funds: These funds tend to invest in liquid instruments e.g. T-Bills, CPs etc. These are also referred to as cash markets and come with risks in terms of interest risk, credit risk, and reinvestment risk.