You have asked many important questions at the same time, all of which require the detailed answer. But I am trying to provide information in brief.
1. What is a mutual fund?
Ans:- A mutual fund is a professionally-managed trust which pools the savings of many investors and invests them in securities like stocks, bonds, money market instruments and commodities like gold. Investors investing in a mutual fund have a common financial goal and their money is invested in different asset classes in accordance with that particular fund's investment objective.
2. How many types of mutual funds are there?
I would be extremely brief. Based on investment objectives, mutual funds can be of the following types:- equity funds, debt funds, liquid funds, hybrid funds (which invest in both equity and bond) and gold funds. There are various sub-categories within each category.
3. What are the benefits of investing in mutual funds>
There are many benefits to investing in mutual funds. The most important one is that the mutual funds are professionally managed. The liquidity of such funds is good. The investment can be in a lump sum or by SIP, i.e., it is flexible. In the long run, it gives better profit than most of the investment instruments. Some of the mutual funds give tax-benefits.
I have written more than ten articles in ISC alone on investing in mutual funds, some of which are mentioned below for your reference. You can go through these articles for a better understanding:-
(a) Top 7 reasons why you should invest in mutual funds
(b) Debt Funds: A better alternative to FD for conservative investors
(c) Top five tips to pick good mutual funds
(d) Different Types of Equity Mutual Funds
(e) Hybrid mutual funds - why to invest
(f) Debt Mutual Funds-Types and Investment Philosophies
(g) Know the basics of ELSS: The tax-saver and wealth-enhancer
You may search for these articles in the Articles section and read these articles for better understanding. Feel free to ask further questions.
Beware! I question everything and everybody.