Knowledge Hub

<p>As a productive investing channel, mutual funds have recently gained a lot of appeal. They have emerged as a preferred investment option amongst retail investors because of the convenience of investing and professional fund management. One may choose from different types of mutual funds in India that are broadly classified into five major categories. The investment goal will determine the best type of mutual fund to pick for your needs.</p>

<p>If you are looking to <a href="https://www.utimf.com/articles/how-to-invest-in-mutual-funds/">invest in&nbsp;mutual funds</a>, you may recall its standard disclaimer, &ldquo;Mutual Fund investments are subject to market risks, read all scheme related documents carefully.&rdquo;&nbsp;Different mutual funds invest in a basket of securities across asset classes, i.e., equity, debt, commodity, etc., and are exposed to certain&nbsp;investment risks.&n

<p dir="ltr"><span>Benjamin Franklin once said, &ldquo;</span>there is nothing certain in this world, except death and taxes.&rdquo; Paying taxes is generally not-so-good feeling for the taxpayers, but it can be seen as one&rsquo;s contribution towards the economic prosperity of the Nation. However, the taxpayers can also avail certain benefits within the overall ambit of Income-tax laws.</p>

<p dir="ltr"><span><img alt="A person wearing a suit and tie

<p dir="ltr">While you might have heard a lot about the common risks of <a href="https://www.utimf.com/articles/how-to-invest-in-mutual-funds/">investing in mutual funds</a>, risk due to liquidity is rarely talked about. Read on to know what it is and why it is so important for every investor.</p>

<p style="display:none">Over last 20 years, there were three occasions where volatility in the capital market was at peak. On these occasions, there was a sharp fall followed by a sharp recovery in short period.</p>

<h2 style="font-size:21px"><strong><span>Historical Volatility</span></strong></h2>

Index funds are a type of funds, which aim to replicate a particular index. The fund manager does not have any individual discretion to make changes in the portfolio changes, and the portfolio can be changed only to align it with the changes in the underlying index. 

<p dir="ltr"><span id="docs-internal-guid-0ee9a2d9-7fff-ba9c-e4db-ddc888ce37c0">Amidst the volatility in the equity markets, instead of chasing high returns, the investors are moving towards their financial goals with caution. With the domestic and global factors shaking the trust and confidence of the investors in equity investments, it is the right time for investors to look for stocks and investments, which may provide stability to the portfolio.

<p dir="ltr"><span>Fixed-income security</span>&nbsp;is an investment product that provides regular returns to investors in terms of periodic interest pay-outs. Such interest pay-outs are made at the interest rates fixed at the time of investing.

<p dir="ltr">Many investors prefer investing in mutual funds, as it allows them to diversify their portfolio. While this may help the investors mitigate investment risks to some extent, the returns may also get moderated. This is because a better performance given by one security may have been partially offset by another security, which has underperformed. Similarly, investors may want to invest in specific sectors or markets to benefit from available investment opportunities.

<p dir="ltr"><span>It is often advised, &ldquo;</span>one should not keep all its eggs in the same basket.&rdquo; Similarly, one should not stay invested in a single asset class and, instead, diversify the portfolio across different asset classes to mitigate the investment risk.&nbsp;</p>

<p dir="ltr"><span><img alt="A picture containing diagram