Financial Education

Our financial education section offers resources and information to help you learn more about personal finance and investing in order to achieve your financial goals.

Types of Mutual Funds

There are several types of mutual funds, each with its own structure, investment objective and strategy.

By structure

An Open-End Mutual Fund

An open-ended mutual fund is a collective investment scheme that issues and redeems shares based on the net asset value (NAV) of the fund. These funds continuously offer new shares to investors and buy back existing shares on demand. Investors can typically buy or sell shares of an open-ended mutual fund at any time at the current NAV. The fund manager is responsible for actively managing the portfolio, making investment decisions, and adjusting the asset allocation based on the fund's investment objectives. Open-ended funds offer investors liquidity and flexibility, as they can enter or exit the fund at their discretion. This liquidity feature makes open-ended mutual funds a popular choice for retail investors who want access to a diversified portfolio and professional management.

A Close-End Mutual Fund

On the other hand, a closed-ended mutual fund has a fixed number of shares that are traded on stock exchanges. Once the fund is launched, the number of shares remains constant and is not influenced by investor demand. Unlike open-ended funds, closed-ended funds do not continuously issue or redeem shares. Instead, investors can buy or sell shares of the closed-ended fund on the secondary market through stock exchanges, similar to buying or selling stocks. The price of the shares is determined by supply and demand dynamics and may trade at a premium or discount to the fund's net asset value. Closed-ended funds typically have a specific termination date or can be terminated through a shareholder vote. These funds often invest in specialized assets or strategies, such as infrastructure, real estate, or private equity. Closed-ended funds can offer investors the potential for higher returns but may have limited liquidity due to the nature of trading on the secondary market.

An Interval Mutual Fund

Interval mutual funds are a unique type of investment vehicle that combines features of both traditional open-end mutual funds and closed-end funds. These funds are designed to provide investors with access to illiquid or less liquid assets that may not be readily available in traditional mutual funds. Unlike traditional open-end funds, which allow investors to buy and sell shares at any time at the net asset value (NAV), interval funds have specific intervals or periods during which investors can buy or sell shares. Typically, these intervals occur quarterly, semi-annually, or annually. The limited redemption periods help fund managers effectively manage the underlying illiquid investments by ensuring that they have sufficient time to buy or sell assets without disrupting the fund's overall portfolio. Interval mutual funds offer investors the opportunity to diversify their portfolios and potentially generate attractive returns from less liquid assets, such as private equity, real estate, or debt instruments. However, it's important to note that due to their illiquid nature, interval funds may carry higher risks and require a longer investment horizon. Investors should carefully consider their investment goals, risk tolerance, and liquidity needs before investing in interval mutual funds.


By Investment Objective

Equity Funds

Equity funds are a type of investment fund that pools money from various investors to purchase a diversified portfolio of stocks or shares in companies. By investing in an equity fund, you can gain exposure to a broad range of companies and sectors, providing potential for long-term growth and higher returns compared to other asset classes such as bonds or cash.

Equity funds allow investors to profit in two ways:

Capital appreciation: the value of the shares in the fund can increase over time, providing capital gains when you sell your shares at a higher price than what you paid for them.

Dividend income: companies held within the fund may pay out a portion of their profits to shareholders, which is passed on to equity fund investors as dividends.

Equity Funds Risk Profile

When you invest in an equity fund, you own a share of the overall portfolio, which is comprised of many individual stocks. The value of your investment will fluctuate based on the performance of the underlying equities in the portfolio. If the value of the equities in the portfolio goes up, the value of your investment will also go up, and vice versa.

Investing in equity funds can provide diversification, as the fund holds many different stocks, which can help to reduce the risk of losses from any single stock or sector. Additionally, equity funds can provide exposure to a range of sectors and industries, which can be difficult for individual investors to achieve on their own.

Fixed-Income Funds

Fixed-income funds are investment vehicles that provide exposure to fixed-income instruments such as bonds, Treasury securities, and certificates of deposit (CDs). When you invest in a fixed-income fund, your money is pooled with that of other investors and used to purchase a diversified portfolio of fixed-income instruments.

One of the benefits of investing in fixed-income funds is that they can provide a steady income stream, which can be particularly important for investors who are looking for a more stable investment option. Fixed-income funds can also provide diversification in a portfolio, as they tend to have a lower correlation with equities and other asset classes.

Fixed-income Funds Risk profile

Fixed-income funds are generally considered less risky than equity funds because they provide a fixed income stream and the return of the principal at maturity. However, they are not without risk. The primary risk associated with fixed-income funds is credit risk, which is the risk that the issuer will default on the bond and be unable to make the interest payments or repay the principal. Other risks include interest rate risk, which is the risk that changes in interest rates will affect the value of the bond, and inflation risk, which is the risk that inflation will erode the purchasing power of the bond’s future cash flows.

To manage the risks associated with fixed-income funds, it is important to practice diversification by investing in a mix of fixed-income instruments across different issuers and sectors. This can help spread out your risk and potentially reduce the impact of any individual issues default or changes in interest rates on your overall portfolio.

Money Market Funds

Money Market Funds are investment vehicles that invest in money market instruments such as cash deposits, short-term government bonds, and commercial paper. These funds provide investors with easy access to a diversified portfolio of high-quality, short-term fixed-income securities.

One of the benefits of investing in Money Market Funds is that they offer a high degree of liquidity and stability, making them a great option for investors who want to preserve capital and have easy access to cash. Money Market Funds also have a lower credit risk profile than other fixed-income investments, as they typically invest in securities with short-term maturities.

Money Market Funds Risk Profile

While Money Market Funds are generally considered to be the least risky of all asset classes, they are not entirely risk-free. They are subject to interest rate risk, which is the risk that changes in interest rates will affect the value of the fund. Additionally, the value of the fund can fluctuate slightly due to changes in the market demand for the securities held in the fund. However, these risks are generally considered to be minimal compared to other asset classes.

Alternative Investment Funds

Alternative investment funds include hedge funds, private equity, and commodity funds, such as gold and oil funds. These funds offer exposure to alternative investments that are generally considered riskier and more complex than traditional asset classes. However, they can also offer higher potential returns and diversification benefits.

One of the primary benefits of investing in alternative investment funds is their potential for higher returns compared to traditional asset classes. For example, hedge fund and private equity funds may offer returns that are not correlated with the broader market, which can provide diversification benefits and potentially higher returns over the long term.

Alternative investment funds Risk profile

Alternative investment funds are generally considered to be riskier and more complex than traditional asset classes. Hedge fund and private equity funds are typically only available to accredited investors who meet certain net worth and income requirements, and they can involve complex investment strategies and high fees. Commodity funds, such as gold and oil funds, can also be subject to significant price volatility and geopolitical risk.

Real Estate Funds (REITS)

Real estate funds are investment vehicles that pool together money from investors to purchase properties such as commercial buildings, apartments, single-family homes, and other income-generating real estate assets. These funds may also include investments in real estate investment trusts (REITs).

One of the primary benefits of investing in real estate funds is the potential for rental income. When you invest in a real estate fund, you can earn regular income through distributions, providing a steady stream of cash flow over time. Additionally, real estate funds can appreciate in value over the long term, which can provide capital gains when the underlying properties are sold.

Real estate funds can provide a hedge against inflation, as property values, rental rates, and distributions tend to rise with inflation.

Real Estate Funds Risk Profile

Real estate funds can be complex and illiquid compared to other asset classes. They require a significant amount of due diligence and research before investing, including understanding the local real estate market, the condition of the properties in the fund, and the management of the fund.  Additionally, real estate funds are not easily tradable, meaning that it can be difficult to quickly sell the fund if you need to raise cash.

It is essential to keep in mind that real estate funds require ongoing management, such as finding and retaining tenants, maintaining the properties, and handling financial and legal matters. Additionally, real estate funds are subject to market fluctuations and risks associated with changes in the real estate market.