These asset classes are cash, bonds and stocks. This type of fund is a good place for keeping cash and earning a high interest rate while keeping the principal secure. In addition, unlike bank fixed deposits, money market funds allow withdrawal of funds at any time. Money market funds buy commercial instruments like commercial paper, repurchase agreements and short term securities. Birla Cash Plus 2.
Stocks are the historically best performing asset classes and the best way to beat inflation.
However, stocks can go both up and down and there is a chance of losing one's principal when investing in stocks. The risk of investing in individual stocks is reduced by investing in stock funds because funds typically own a portfolio of many stocks. While the diversification offered by stock funds reduces the risk on a sharp decline due to a fall in the price of any one security, it does not protect one from a market downturn. For the small investor, stock mutual funds offer the easiest way to take part in market gains, provided one is able to withstand the periodic volatility of the markets. I-NIT '95 5.