The different types of mutual funds are variations of three main investment vehicles-equity funds, fixed income funds, and money market funds.
Mutual funds are investments that pool individual investor’s money to create a portfolio of stocks, bonds, securities etc. that each investor will share in the outcome. The sheer number of possibilities of combinations that construct a singular portfolio is mind-numbing. Take a look at a simplified slice of general options.
Major Categories of Mutual Funds
There are many types of mutual funds but they are all variations of three main investment vehicles, equity funds (also called stock funds), fixed income funds (also called bond funds), and money market funds. Equity funds invest in stock with the general objective being long-term capital growth. Fixed income funds primarily invest in government and corporate debt with the general objective is to provide steady income. Money market funds invest in mainly in Treasury bills with the objective being safety.
Variations of Mutual Funds
Index Funds: These funds set out to mirror the returns of the major indexes such as the Dow Jones Industrial Average, the NASDAQ, and the S&P 500.
Income Funds: These funds attempt to provide income monthly rather than performing for capital appreciation.
Sector Funds: These funds invest in one particular business sector such as technology.
Growth Funds: These funds focus on large capital gains.
Global Funds: As the name implies these funds focus on investments outside of the country.
Balanced Funds: These funds strive to balance the investment portfolio with safety, capital appreciation, and income by investing in a mixture of income and equity funds.
“Mutual Funds: Introduction.” Investopedia.com – Your Source For Investing Education. N.p., n.d. Web. 8 Dec. 2010. http://www.investopedia.com/university/mutualfunds/.
“Invest Wisely: Mutual Funds.” U.S. Securities and Exchange Commission (Home Page). N.p., n.d. Web. 8 Dec. 2010. http://www.sec.gov/investor/pubs/inwsmf.htm.