Tuesday, December 15, 2009

Different Types of mutual funds

No matter what type of investor you are there is bound to be a mutual fund that fits
your style. According to the last count there are over 10,000 mutual funds in North
America! That means there are more mutual funds than stocks.
It's important to understand that each mutual fund has different risks and rewards.
In general, the higher the potential return, the higher the risk of loss. Although some funds are less risky than others, all funds have some level of risk--it's never possible to diversify away all risk. This is a fact for all investments. (You can learn more about this in our financial concepts tutorial.)
Each fund has a predetermined investment objective that tailors the fund's assets,
regions of investments, and investment strategies. At the fundamental level, there
are three varieties of mutual funds:
1) Equity funds (stocks)
2) Fixed-income funds (bonds)
3) Money market funds
All mutual funds are variations of these three asset classes. For example, while
equity funds that invest in fast-growing companies are known as growth funds,
equity funds that invest only in companies of the same sector or region are known as
specialty funds.
Let's go over the many different flavors of funds. We'll start with the safest and then work through to the more risky.

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