Know the mutual fund basics before investing in them

Mutual funds are fast becoming the first choice of the millennial.

The transparency, low-cost and the potential to generate a return higher than inflation is what makes mutual funds a popular investment option for them. Investors, with an objective of earning a positive return, pool in their money into an investment product called a mutual fund. The fund uses the money to invest in various assets like equity, debt or gold in order to generate the return for the investors. Funds investing primarily in equities are called the equity or growth funds while those investing in debt assets are termed as debt or income funds. Primarily, there are two categories of mutual funds - equity and debt funds, which represent the two asset classes. Let us look at the basic features of each of them for better understanding.

Equity mutual funds