Mutual funds are investment instruments in which you can put your money. The money you invest is put into the stocks of various companies, and the performance of the funds will be based on how well these companies do in the market. There are many types of mutual funds into which you can put money. These can be high risk or ones with minimal risk, depending on how ready you are to invest your money into them.
Types of Mutual Funds into Which Investment Can Be Made
Usually, people go in for mutual funds in which their money is put into a fund for a short or long period. During this period, it will accrue interest, and at the end of the period, it will return a value which is significantly higher.
One type of mutual funds is the money market fund in which investment is made into short terms fixed income securities. This type of funds is opted by those who want to make a safe investment, wherein the return is low than other types of mutual funds. Examples of those types of funds are treasury bills, commercial paper, deposit certificates etc.
Another type of funds that you can invest into is the fixed income variety. They give a fixed rate of return and the money given out by them is in the form of regular interest. These funds can be put into investment grade bonds, government bonds and high yield corporate bonds.
One type of fund that grows very fast yet has a lot of risks associated with it is equity funds. They give good returns, but you should accept that when they fall down in price, the losses can be significant. You should invest in them in the long term and not worry about price fluctuations, selling them only when they perform better. There are available in different forms such as income funds, large-cap stocks, growth funds, mid-cap stocks etc.
You can also find balanced funds variety in which money can be put into a mix of equities and fixed income securities. These are middle type funds which are not as risky as equity funds but more risky than fixed income funds. If they are of the aggressive type, you will find them having more equities and lesser bonds, but in the conservative type, it is vice versa. Many investors put their money into these types of mutual funds because of their attractive returns.
Yet another very attractive type of mutual funds is the specialized variety. It focuses on specialized investment such as commodities, real estate, socially responsible investment, etc. The kind of returns they offer are very good as their performance is based on the condition of the market. You can also look into Fund of Funds in which the fund makes an investment into different types of other funds. The benefits of this type of investment is that money is highly diversified, and there is a lot of cost savings.
Opt for a type of mutual funds through which you will be putting your money into the most attractive investment which gains good rewards. These will get you maximum benefits and least risks.