There are a wide variety of mutual funds, including those that specialize in specific type of investments. Some of the more popular fund types include:

Money Market Funds
A money market fund seeks to earn interest for shareholders while maintaining a net asset value of $1 per share. Mutual funds, brokerage firms and banks offer these funds. Portfolios are comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments. A money market fund's purpose is to provide investors with a safe place to invest easily accessible cash-equivalent assets characterized as a low-risk, low-return investment.

SEE: Why Money Market Funds Break The Buck and The Pros And Cons Of Money Market Funds

Bond Funds
Bond funds invest primarily in bonds and other debt instruments. The exact type of debt the fund invests in will depend on its focus, but investments may include government, corporate, municipal and convertible bonds, along with other debt securities like mortgage-backed securities. A bond fund's purpose is to provide investors with a source of income that is generally less volatile than income derived from investments in the stock market.

SEE: Evaluating Bond Funds: Keeping It Simple and Bond Funds Boost Income, Reduce Risk

Balanced Funds
Balanced funds combine a stock component, a bond component and, sometimes, a money market component in a single portfolio. These funds generally stick to a relatively fixed mix of stocks and bonds that reflects either a moderate (higher equity component) or conservative (higher fixed-income component) orientation. A balanced fund's purpose is to provide a mixture of safety, income and modest capital appreciation.

SEE: In Praise Of Portfolio Simplicity

Equity Funds
Equity funds invest primarily in stocks. They are principally categorized according to the size of the companies in which they invest (large cap, small cap, mid cap), the investment style of the holdings in the portfolio (growth, value, core) and geography (domestic, international).

Global/International Funds
International funds come in two varieties. The first is global funds, which invest in both foreign and domestic markets. The second is international funds, which invest only in foreign markets. These can be broad market, regional or single-country funds. For investors who live in developed nations, global and international funds generally offer both the opportunity for higher returns and the possibility of greater volatility.

Specialty Funds
Specialty stock funds invest in target business sectors such as healthcare, commodities and real estate. Because their focus is more concentrated than other equity funds, they tend to offer both the opportunity for higher returns and the possibility of greater volatility.

Sales Charges

Related Articles
  1. Managing Wealth

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
  2. Investing

    8 Fund Types To Use In A Recession

    When the economy blows up, these funds offer some protection from major losses.
  3. Investing

    Make Sure You Avoid Adding These Mutual Funds to Your 401(k)

    Find out which five types of mutual funds you should avoid in your 401(k), including why buying this year's hottest fund is likely a losing bet.
  4. Investing

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
  5. Investing

    VTIBX, DFGBX, PIGLX, TPINX, ANAGX: Top 5 Global Bond Funds

    Learn about the top global bond funds for 2016. See how funds with longer maturities and duration have greater exposure to interest rate risk.
  6. Investing

    Bond Funds Boost Income, Reduce Risk

    These funds can provide stable returns for those who depend on their investment income.
  7. Financial Advisor

    Protect Mutual Funds From a Volatile Market

    Learn about the best ways to invest in mutual funds, including which types of funds are safest, while still protecting your investment from market volatility.
Frequently Asked Questions
  1. Why Do Most of My Mortgage Payments Start Out as Interest?

    Fear not: Over the life of the mortgage, the portions of interest to principal will change.
  2. What is the difference between secured and unsecured debts?

    The differences between secured and unsecured debt, and how banks buffer risks associated with each type of loan through ...
  3. How Many Times has Warren Buffett Been Married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were unconventional.
  4. What's the smallest number of shares of stock that I can buy?

    Many people would say the smallest number of shares an investor can purchase is one, but the real answer is not as straightforward. ...
Trading Center