Types of Mutual Funds: Open Ended vs Closed Ended Funds

Open ended schemes: In this scheme there is an uninterrupted entry and exit into the funds. The open ended scheme has no maturity period and they are not listed on the stock exchanges. The open ended fund provides liquidity to the investors since repurchase is available.

Closed ended funds: The closed ended funds have a fixed maturity period. The first time investments are made when the closed ended scheme is kept open for a limited period. Once closed, the units are listed on a stock exchange. Investors can buy and sell their units only through stock exchanges.

Other classification

Growth scheme: Aims to provide capital appreciation over medium to long term. Generally, these funds invest their money in equities.

Income scheme: Aims to provide a regular return to its unit holders. Mostly, these funds deploy their funds in fixed income securities.

Balanced scheme: A combination of steady return as well as reasonable growth. The fund of this scheme is invested in equities and debt instruments.

Real Estate

The real estate market offers a high return to the investors. The word real estate means land and buildings. There is a normal notion that the price of the real estate has increased by more than 12% over the past ten years. Real estate investments cannot be encashed quickly. Liquidity is a problem. Real estate investment involves high transaction cost. The asset must be managed, i.e. painting, repair, maintenance, etc.

Commodities

Commodities have emerged as an alternative investment option nowadays and investors make use of this option to hedge against spiraling inflation. Commodities may be broadly divided into three: metals, petroleum products, and agricultural commodities. Metals can be divided into precious metals and other metals. Gold and silver are the most preferred ones for beating inflation.

Gold

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge against economic, political, and social fiat currency crisis. Gold prices are soaring to new highs in recent years compared to the previous decades because whenever the signs of an economic crisis arise in the world markets, investors may find shelter in gold as the safest asset class for investors all around the world.

Silver

Yellow metal is treated as a safe haven, but silver is used abundantly for industrial applications. Investment in silver has given investors super returns than what gold has given.

Debentures/Bonds

A bond is a loan given by the buyer to the issuer of the instrument. Companies, financial institutions, or even the government can issue bonds. Over and above the scheduled interest payments as and when applicable, the holder of a bond is entitled to receive the par value of the instrument at the specified maturity date.

Equity Share

Equity, also called shares or scrips, is the basic building blocks of a company. A company's ownership is determined on the basis of its shareholding. Shares are, by far, the most glamorous financial instruments for investment for the simple reason that, over the long term, they offer the highest returns. Predictably, they're also the riskiest investment option.

Concept of Risk and Return

Risk: The dictionary meaning of risk is the possibility of loss or injury; risk the possibility of not getting the expected return. The difference between expected return and actual return is called the risk in investment. Investment situations may be high risk, medium risk, and low risk investment.

Types of Risk:

• Systamatic risk: The systematic risk is caused by factors external to the particular company and uncontrollable by the company. The systematic risk affects the market as a whole.
• Unsystematic risk: In case of unsystematic risk, the factors are specific, unique, and related to the particular industry or company.