Mutual funds are an example of an investment vehicle in which they pool all the capital from various investors to buy a bundle of securities like stocks, bonds and money market instruments. A professional investment manager manages the fund and decides on where to allocate the fund’s assets so as to realise the fund’s objectives of investment.  Benefits of mutual funds.

• Diversification: Investing through mutual funds allows an investor to put their money into a diversified basket of stocks by just one investment. This may in fact reduce risks since the security’s performance will not have an substantial influence on the entire portfolio of the fund.
• Professional management: Professional investment managers handle mutual funds, providing them with the requisite experience and skills for making prudent financial decisions.
• Liquidity: In most cases, mutual funds are open-ended which allows investors to purchase or redeem shares daily.
• Affordability: In addition, they are reasonably priced and most people can easily afford them since their minimum requirement is only some amount.

Some different type of mutual funds are given below

• Equity funds: Most equity funds focus on stock investments. Such funds have a high probability of good profits but are the riskiest.
• Bond funds: Most bond funds invest in bonds. The investments in these accounts may be less risky compared to equity funds but may provide lower returns.
• Hybrid funds: Hybrid Fund is an Investment of both Stocks and Bonds. They provide a mix of low risks and moderate gains.
• Money market funds: Money market funds invest on short term debt instruments such as treasury bill and commercial paper. These funds have a moderate risk and a low yield potential.