If you wish to invest in the markets but do not have sufficient knowledge or resources, a mutual fund is the way to go. Mutual funds offer you an easier way to invest in the market without any need to directly monitor or manage the investments on a regular basis. Basically, it is nothing but a pool of funds contributed by a number of investors with an Asset Management Company (AMC) which assigns a fund manager to invest it in stocks, bonds or money market instruments for commensurate returns.

The beauty of this investment option lies in the fact that you can start by investing as little as INR 1000 and have a professional fund manager allocate the accumulated pool of funds in suitable stocks or securities to create a diversified portfolio of investments. So, you get to have a slice of the profits from some well-performing stock by investing a relatively small sum of money. Additionally, mutual funds offer periodic dividends based on performance of the funds.

Before investing, you need to know all about different types of funds which offer you the option of investing in a variety of financial instruments and get proportionate returns based on the size of your funds. These are explained below:

You can choose the type of fund which suits your requirements or opt for a balanced fund instead in which funds are allocated in both equity and debt instruments to reduce the risk level to an extent and still gain from high-performance equities. It is important to read the offer document carefully before investing in mutual funds and choose your Asset Management Company (AMC) with discretion to avoid any issues later.