Question

Describe the following types of funds:

1. Index fund
2. Sector fund
3. Socially responsible find
4. International fund

Answer 1

A . Index funds are a type of mutual funds which are replication of an index and they are comprised of stocks in same proportion as that of a benchmark. Such type of mutual funds are highly passive in nature and they just copy the the overall index. they believe in the theory of efficient market hypothesis and they follow the rules that investing into different stocks cannot make them outperform the index.

B.Sector funds are type of mutual funds which are cyclical in nature and they believe into investment into certain sectors of economy which are into the current taste and cycle of the market. This tends to be more timing the market, kind of a mutual fund which try to take the benefit of of momentum which is running through a particular Sector.

C.Sicially responsible Mutual funds are the type of fund which invest into certain companies which are highly ethical in nature and they have never engaged into any kind of malpractices.this kind of mutual fund also does not invest into certain company Which manufacture certain products which are injurious to the public health such as liquor companies.

D.international funds are type of mutual funds which provides with an opportunity to invest in the international markets.this type of mutual funds majorly invest into another economy and try to benefit the domestic shareholders through investment into international economy.