Mutual Funds: Is it the right time to invest?

Mutual funds in India have shown significant growth in the last few years. The asset under management of mutual fund investment in India is at 8 per cent of the GDP and it is expected to reach 20 per cent of the GDP in the next five years. Various kinds of mutual funds are available to cater to the needs of different kinds of investors.

Mutual fund can be divided into two category, open-ended scheme and closed-ended scheme, according to its maturity period. Open ended schemes do not have a maturity period and can be subscribed on a regular and continuous basis. The key characteristic of these schemes is liquidity.

A closed-ended scheme has a fixed maturity period. It can be subscribed during a stipulated period, during the IPO. Thereafter, the scheme can be bought and sold on the stock exchanges, where the unit of these schemes is listed.

The schemes are also classified on the basis of the objectives of the investor; i.e. how aggressive is the investor and how much risk it can bear? Growth scheme, balanced scheme and income schemes are some of these schemes.

Growth or equity schemes carry high risk and so the returns or losses are also high. These schemes mainly invest in equities and so it is largely impacted by the stock market's movement. These schemes are suitable for investors, who seek high capital appreciation and have the long-term view.

Income or debt schemes are less risky compared to the growth schemes. They invest in treasury bills, commercial bills and certificates of deposit etc, which are safer instruments and the value of these schemes, fluctuate less than the equity schemes. These schemes are suitable for investors who want to invest for short term.

Balanced schemes are suitable for investors who are looking for moderate growth. These schemes invest in equity and fixed income securities and provide both regular income and growth. These funds fluctuate due to stock market movement, but the volatility is less compared to equity schemes.

The mutual funds are either sector specific or diverse. The performance of the sector specific funds depends on the performance of the particular sector so they are comparatively more risky than the diverse funds scheme, but the returns are high. The diverse fund scheme invests the money into different sector and so the risk is minimized.

So, the investors can compare different mutual funds and bet on various kinds of schemes, as per their requirements. The performance of the mutual fund is denoted by the Net Asset Value (NAV). It is the market price or value of the securities at a particular time.

The stock market has taken a beating in the last six months. Many fund managers believe that this is the right time to invest in the mutual fund. The NAV of most of the mutual funds are to low and so any investor who has long term view can bet on these mutual funds. The Indian economy is still strong and so the long term future is impressive.

Author is an investment advisor and associate editor to mutual funds in india website. The website is committed to provide visitors with complete information on stock market news india and latest IPO news India. For more information visit http://www.ndtvprofit.com.