Mutual funds are professionally managed investment schemes by Asset Management Companies (AMCs) that allow a group of people to pool their money to build a huge corpus. AMCs then employ Fund Managers, who are financial experts, to build a portfolio by investing the corpus in stocks, bonds and other securities. AMCs utilize Fund Managers to create different types of funds across the risk–return spectrum (also called the risk–return trade-off) to cater to the varying financial needs of investors.
Why invest in mutual funds?
- Professional Management – Leave your money in the hands of expert Fund Managers
- Ownership – You as an investor own units of the funds, not of the individual underlying securities
- Diversification - Investing across different sectors/securities lowers your risk
- Choices - You have several funds to choose from, depending on your investment objectives, risk appetite and need for liquidity
- Alignment - Align your personal financial needs with the type of fund you are investing in
Types of Mutual Funds
Mutual funds are divided into several categories, based on the kinds of securities invested in, the investment objectives, and the type of returns they seek. Let’s take a look at some of the different types of Mutual Funds -
- Equity FundsThis is the largest category of mutual funds and it invests principally in stocks. There are different types of equity funds. Some equity funds are named based on the size of the companies they invest in: small-, mid-, or large-cap. Others are named by their investment approach: aggressive growth, income-oriented, value, and so on. As equity funds come with quick growth, the risk of losing money is comparatively higher. Typical time horizon for investment is 5 years.
- Fixed-Income or Debt FundsDebt funds or Fixed Income funds invest primarily in fixed-income securities such as long-term bonds, securities, treasury bills, Fixed Maturity Plans (FMPs), Gilt Funds, Liquid Funds, Short-Term Plans, and Monthly Income Plans, among others - with a fixed interest rate and maturity date. If you are a passive investor looking for a small but regular income (interest and capital appreciation) with minimal risks, you may invest in such funds. Typical time horizon for investment: 3 years.
- Liquid FundsLiquid funds are a form of debt mutual funds. They typically invest in short-term debt instruments such as treasury bills, commercial papers, FD, and other debts with low maturity durations. For a risk-averse investor with surplus cash, liquid funds are a good short-term bet as they do not come with a lock-in period, can be liquidated instantly, provide moderate returns at very low risks, and allow you to get more out of your cash reserves. Typical time horizon for investment is 3 months.
- Balanced or Hybrid FundsBalanced funds, as the name suggests, are balanced as the investment is made in an assortment of asset classes – such as stocks, bonds, money market instruments, or alternative investments. The idea is to reduce the risk of exposure across asset classes. This kind of fund is also known as an asset allocation fund.
- Money Market FundsMoney Market Funds are a short term, debt instrument that consist of mostly government Treasury bills. You may not get any great returns on your investment - this kind of investment earns a little more than a savings account. Investors in such funds may opt for a short-term plan (not more than 13 months) to lower the risk of investment on such funds.
- Income FundsThe objective behind Income Funds is to ensure a steady stream of income. Normally very conservative investors and retired folks invest in this kind of mutual fund. This kind of fund generates income by investing in relatively long-dated debt instruments like government securities, corporate bonds, debentures, certificates of deposit, etc.
- Tax-Saving FundsEquity Linked Saving Schemes (ELSS) are popular as it couples wealth management with tax savings. They also have a low lock-in period of three years and invest mainly in equity (and related products). These funds are generally preferred by salaried investors with a long-term investment horizon.
- International/Global FundsThese are two different funds. The international fund (or foreign fund) invests only in assets outside your home country, while the Global Funds can invest anywhere in the world. These types of funds carry with them political and other risks associated with the country they are in. So they tend to be volatile.
- Pension FundsThere are some kinds of mutual funds that help you put away a portion of your income in a chosen pension fund. This grows over a long period of time and can be helpful for you, post retirement to handle emergencies.
- Exchange Traded Funds (ETFs)The Exchange Traded Funds (ETFs) are in many ways similar to mutual funds, however, they have the additional features of an ordinary stock and can be traded and listed on exchanges. Compared to mutual funds, ETFs are more cost effective and liquid.
Whether a learner or a regular at investing, you can always benefit from the knowledge and expertise of a professional. When you invest in Mutual Funds distributed by Citibank, you can enjoy the advantage of their extensive research and a rigorous selection process leveraging the CitiChoice fund shortlist.
- CitiChoice fund shortlistCitiChoice is a mutual fund shortlist created basis extensive analysis and backed by 15+ years of legacy. Funds are selected based on quantitative and qualitative parameters. The shortlist is then prepared keeping your risk appetite in mind. This list is updated every quarter to keep up with the changing market conditions.. Hence, with CitiChoice, you can easily choose and invest in liquid, debt, equity, and ELSS funds suited for you and start your investment journey.
That's not all. Consider the many additional benefits of investing in Mutual Funds distributed by Citibank today
- Professionally managed - Expert management of your money by qualified professionals at AMCs
- Assistance from certified Citibank Investment / Wealth Counsellors
- Intelligent Investing - Diversified to significantly lower your risk
- Affordability – Depending on AMC, You can start investing with as little as Rs 1,000. You can invest that amount in our Systematic Investment Plan (SIP) on a regular basis.
- Transparency - The performance of a Mutual Fund is reviewed by various publications and rating agencies, making it easy for investors to compare one fund to another
- 24x7 Access - 24x7 access using Citibank Online and Citi Mobile App, to view your account and transact conveniently from anywhere, anytime.
They also have a very handy calculator that will help you make the right decisions while investing. Depending on your financial needs, it will help you take the right decisions on your investment journey. Your needs can be varied – and can include anything from a family vacation, child’s education, down payments for a new home to retirement corpuses. The SIP calculator will then help you decide how much you would need to start saving per month. You can log into Citibank Online or your Citi Mobile App today and explore the ‘Easy Investing’ option to begin investing.