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Types of mutual funds?

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27th Nov 2009 by Ellen Silverman

A mutual fund is a managed pool of money from different investors that is invested in an assortment of stocks, bonds or cash. These funds are operated and managed by financial services companies. More than eighty million investors in the United States own mutual funds.

There are several hundred mutual funds offered. Mutual funds are often referred to as open-end funds. This means there is no limit to the number of shares investors can buy and sell. Closed-end funds are investment companies that sell a fixed number of shares traded only on the stock market.

The money invested in a mutual fund is pooled along with that of other shareholders with similar financial goals. Most mutual funds are part of a larger investment company or family of funds. Each fund is managed by a team of professional money managers who monitor the fund's performance and choose investments that they believe will help the fund reach the investment objectives stated in the prospectus.

One advantage that mutual funds have over stocks is that the investment is automatically diversified since the fund is comprised of an assortment of stocks and bonds. This diversification is key to mitigating investment risk. Another advantage of investing in mutual funds is liquidity. One can redeem or sell shares any day the stock market is open. However, investment values will fluctuate and there is no assurance that the objective of any fund will be achieved.

Types of Funds
There are different types of funds that are available such as stock or equity funds, bond funds, balanced funds (a combination of stock and bond funds), lifestyle funds or money market funds. The following are the different types of stock funds, ranked in order of the highest to lowest investment risk:
Aggressive Growth
Growth
Growth & Income
Income
International Stocks
Specialty
Lifestyle

Bond Funds
Bond funds are mutual funds that invest in various types of bonds. Bond funds are not the same as bonds, as there is no fixed yield or contractual obligation to repay investors their principal at a future date. The main types of bond funds are:
Corporate
Global
Government
High-yield
Mortgage-backed
National municipal
Municipal
Strategic Income

In addition to the stock and bond funds, mutual fund investing offers other choices such as balanced funds or money market funds.

Share Classes
When investing in a mutual fund, one purchases a share of that fund. There are different share classes, the most common of which are Class A, B and C shares. Share classes vary mainly in the type of sales charge and expenses. The best share class depends on a number of factors, including the amount invested and length of time one plans to hold the shares.



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13th Nov 2009 by Gary

Mutual funds are no different in stocks, bonds or cash, as far as understanding types goes. For example, you may buy a stock which has tremendous potential, but with that potential comes a lot of risk. With a mutual fund, which buys a basket of stocks, bonds or cash (Treasuries, etc.), and in many cases a combination of those three, they also focus on certain risk/reward ratios which will be determined by each individual's or institution's goals and comfort levels. So mutual funds can focus on large, safe companies, or up and coming stars which haven't established whether they're going to really be a long-term success. They can mix those two together to create a combination of safety and upside at once. You can have funds that are specialty funds, sector funds or mutual funds which focus on international investing. A safe way to invest with low fees but not huge upside is via index funds, which basically track certain elements of the market. The S&P 500 is an example of that. With over 10,000 mutual funds in America alone, it's impossible to list the numerous types. Like any investment, what type you buy into should be determined by you goals and risk tolerance. There is a mutual fund to meet anyone's purpose in relationship to that.

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9th Nov 2009 In Mutual Funds 2 Answers | 1734 Views
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