5 Common Types of Mutual Funds

Many people choose mutual fund as their best investment tool as they believe that they will acquire Market Neutral from it. But, only a few really knows about mutual fund and its types very well, below are the most common mutual funds that you can learn for, so we hope by learning through this article you will allocate your money in the right type of investments.

  1. Money Market Funds

This type of funds invests in short-term fixed income securities like government bonds, treasury bills, banker’s acceptance, commercial paper and certificates of deposit. They typically serve you with a safer investment, however they offer you with a lower potential compare to other types of mutual funds. Canadian money market funds try to keep their net asset value (NAV) stable at $10 per security.

  1. Fixed Income Funds

These funds buy investments that pay a fixed rate of return like government bonds, investment-grade corporate bonds and high-yield corporate bonds. They aim to have money coming into the fund on a regular basis, mostly through interest that the fund earns. High-yield corporate bond funds are generally riskier than funds that hold government and investment-grade bonds.

  1. Balanced Funds

You should try this kind of investment if you would like to have a mix investment, since it is a mixed up between equities and fixed income securities, therefore, it will balance your return and risk of losing money. Most of these funds follow a formula and have a management team to split money among the different types of investments. This fund has fixed income funds and less risk compares to pure equity funds. Aggressive funds hold more equities and fewer bonds, while conservative funds hold fewer equities relative to bonds.

  1. Equity Funds

These funds usually invest your money in stocks; therefore, you will have a higher risk of losing money. However, your money will grow faster compare to money market or fixed income funds. You can choose from different types of equity funds including those that specialize in growth stocks, income funds, value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of these.

  1. Specialty Funds

This fund is a unique type one as they only focus on specialized mandates such as real estate, commodities or socially responsible investing. For instance, a socially responsible fund may invest in companies that support human rights and diversity, and will avoid companies involved in illegal things such as alcohol, tobacco, gambling, weapons and the military.

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