There are a variety of mutual funds that are available for anyone that has interest in investing. Mutual funds are plentiful, and there’s just about something for everyone. A mutual fund, in the most basic terms, is a pool of money that is professionally managed. There are more than 10,000 mutual funds, but they are typically grouped into 3 basic types of mutual funds.

Most investors like to add all of them to their portfolio for diversity. The information below gives an overview of the 3 types.

1. Stock Mutual Funds. Stock funds fluctuate more than any of the other funds that are available. They may have the highest rates of return, but they also may cause the investor to lose more money than any other type of mutual fund. These funds are also referred to as equity funds.

These funds typically perform best over a long term, though this is no guarantee of overall success. This is one of the most common forms for investors.

There are a variety of fund types within this category. Stock fund types include value stocks, dividend-paying stocks, sector-focused stocks, and large cap stocks. There are also index funds available that let you invest in a multitude of funds.

2. Money Market Mutual Funds. Money market funds, in contrast to stocks funds, are characterized by short term investments in item such as Treasury bills and savings bonds. These funds have much slower growth rates than stock fund, but the upside to this is that investors don’t run the risk of losing money with these funds.

The world of money market funds is known as a safe haven for all of those that are not completely comfortable with the volatile state of stock funds.

Many money market funds can be used as a type of checking account. This makes the fund in the account readily available, but investors still have the ability to earn interest on the funds that remain in the amount.

3. Bond Mutual Funds. Investors that are looking for something other than stock or money market funds have another option with income bonds. These are funds that only invest in corporate and government bonds. These bonds are characterized by consistent returns.

The return on these bonds still cannot match the possibilities that can be obtained with stock funds, but they offer a significantly higher return than the money market funds. The higher return that is offered does come with some risk, however, because the interest rates determine the values of the bonds. If the interest rates drop, for example, the value of the stock drops as well.

People that want a little of the best of both worlds have the ability to pick blended mutual funds. This is a combination of both stock and bond funds. This is a nice medium for those that like to have some aggressive returns on stock funds and still keep a certain level of stability with bond funds.

Keep learning more:

1. What Are Exchange Traded Funds?


2. What is a Mutual Fund?


3. The Disadvantages of Investing in Bonds


4. The Advantages of Investing in Bonds


5. Inflation is the Biggest Risk of Bond Investing

Learn How to Invest

This website provides completely free investing courses for normal people so they can learn how to invest correctly, retire early, and find financial freedom and security.

Enter your email below, and I'll personally email you a free course on investing in gold, a free guide to dividend stocks, and a free course on building a passive investment income.

You'll also get weekly free tutorials on financial security, getting debt free, and living a wealthy lifestyle on a limited budget.

And it's all free. Get it all right now: