Multiple Types of Mutual Funds

11/30/2016 Dhanur Chauhan 0 Comments

There are different types of mutual funds for investors to choose from. No matter the type of investor that you are, you should be in the position to know the best options to fit your investment style. In America for instance, surveys indicate that there are more than 10,000 types for investors to choose from. This portrays that there are more mutual funds than stocks. With myriad options available and more to come for investors to choose from, choosing the right ones may turn out to be a daunting task. However, armed with all the necessary information, choosing the right investment option should be an unproblematic task.

It is imperative to understand that different types of mutual funds have different risks and rewards. The higher the potential return of investment, the higher the risk of loss. Though some may be riskier than others, all of them tend to have some form of risk. While you are investing, it is not possible to evade all the potential risks. Therefore, no matter the type of investment you are making, you have to be prepared for facing some risks only that some investments may be riskier than others.

While dealing with equity funds, for instance, you are likely to encounter terms such as growth funds and specialty funds. Growth funds refer to equity funds that invest in fast-growing companies while specialty funds refer to equities that invest only in companies of the same sector or region. Before you set out to investment journey, it is imperative to be equipped with vast information about the different trends and characteristics of your investment.

As earlier noted, one of the most common type of mutual funds is the money market fund. The money market consists of short-term debt instruments mainly the Treasury bills. This is a good investment option. Therefore, money market funds are common investment options especially for individuals who may prefer dealing with less risky investment options.

Of all the main types, equities form the largest percentage. Equity funds refer to the funds that invest in stock. There are many forms of equity funds since there are numerous categories of different equities. And all of these fall under the broad umbrella of mutual funds.

It is imperative to comprehend the fact that every mutual fund as its separate paths of rewards and risks. The more you expect in return, the more risk there is involved in the fund it is the same with almost everything in life. All types have risks involved with them even though some might have a lower level of risk than others.

The money market is one of the types that are less risky than most of the other funds out there. You would not get anything huge as a return investment, but then you can sleep at night knowing that your principal is safe.

Balanced funds are meant to give an overall mix of income, capital appreciation, and safety. The main strategy here is to invest in combinations of equities and fixed income funds, however; the weighting can have restrictions to a specific minimum or maximums for the class asset.

Equity funds are funds that represent the biggest category of funds. The main objective here is to gain capital growth in the long run, along with an income of sorts.

Global funds or international funds can be invested anywhere in the world. International funds are more volatile than others and entail unique political and country risks thus it becomes difficult to classify them as safer as or riskier than local or domestic investments.