What is Mutual Funds ?

A mutual fund is a company that collects money from many investors and invests it in securities like stocks, bonds, and short-term debt. Investors buy shares in mutual funds, which represent their ownership in the fund and its income.
There are different types of mutual funds, including:
Equity funds
Invest in stocks or equities, such as large-cap, mid-cap, or small-cap stocks, or in specific sectors like technology or healthcare. These funds have a higher degree of risk because their returns are linked to market movements of stocks, but they are a good choice for long term goals like retirement planning or buying a house.
Hybrid funds
Also known as balanced funds, these invest in a mix of equity and debt instruments to achieve a balance between growth and income. They can also include gold or real estate.
Index funds
Aim to replicate the performance of a specific stock market index, like the Nifty 50 or Sensex.
Liquid funds
A type of debt mutual fund that mainly invests in short-term debt securities, offering fixed returns. These securities typically include money market instruments like treasury bills, commercial paper, and certificates of deposits with maturities of up to 91 days.
Gilt funds
Debt funds that only invest in bonds and fixed interest-bearing securities issued by the state and central governments. Since the money is invested with the Government, these funds are said to carry minimal risk.