Types of Mutual Funds
This section describes types of funds in which investors may invest. A mutual fund investment is generally offered through a prospectus and in those states in which the broker dealer is registered. Mutual fund investments can lose value and are not guaranteed, please make sure you consult with your investment professional.
No matter what type of investor you are, there’s bound to be a mutual fund that fits your style. The types of mutual funds vary according to the fund’s investment objective. It’s important to understand that each mutual fund type comes with its own set of risks and rewards. Keep in mind that the higher the potential return, the higher the risk of loss.
Money Market: These funds are a great place to park your money, whether you’re storing money for emergencies, saving for the short-term, or storing cash from the sale of an investment. A money market invests in high quality, short-term securities that rival the returns of a certificate of deposit and are more than a checking or savings account.
Growth: A growth fund invests primarily in common stock for long-term capital gains. It rarely provides dividend interest, but can be a good choice for those with long-term goals such as retirement, who are not risk-adverse.
Income: An income fund invests in either corporate, government, or municipal debt security. A debt security is an obligation that pays interest on a regular basis. As a result, an income fund is designed for investors who are looking for periodic income payments, such as more mature individuals.
Balanced: A balanced fund invests for both growth and income. The fund will invest in both equity and debt securities. Its goal is long-term growth as well as income.
Index: These funds try to mimic a chosen index, such as the S&P 500 or NASDAQ, by purchasing small amounts of each stock in a market. These funds tend to be very cost efficient and often beat most actively managed funds.
Sector: Sector funds choose to invest in a particular industry or segment of the market, such as technology, health care, or utilities. They are less diversified than most mutual funds, but they do offer greater diversification within a specific industry.
Global: Global funds invest in both U.S. and international stock (as opposed to foreign funds, which invest primarily outside of the U.S.).