Question

Describe the following types of funds:

1. Bond fund
2. Money market mutual fund
3. Index fund
4. Sector fund

Answer 1

A . A bond fund is a type of mutual fund which invest into securities which are debt oriented because such securities are highly risk averse and these are the preference for investors who wants to generate income through investment into risk-averse securities.

B.Money market Mutual funds invest into money market securities of different companies and these are highly liquid because such securities are traded so, redemption in mutual fund is easy. It is an open ended Mutual fund which invest into short term securities which would be short term United state treasury bills and corporate bonds.

C. An index fund is a type of mutual fund which only invest into to an index and it has the composition of similar to an index. These funds are highly passive in nature as they are replication of an index and they provide the return as per the index return. It is a mutual fund which copy the benchmarks return

D.sector fund is a type of mutual fund which invest into a particular sector in economy.These type of mutual funds are more cyclical in nature which follow the sectoral theme which are into the current theme and cycle of the market.