As a beginner in the investing life there are topics which are easier and there are topics which are harder. There are a lots of things to keep in mind and a lots of things to learn and plan. So thats why today we will talk about some different types of mutual funds which will be okay to know about.
There are some mutual funds which put their focus on a single asset class (like bonds or stocks). While some other mutual funds put their focus on investing in a variety of things you and they can invest your money.
Bond Funds AKA Fixed-Income.
This type is less risky than stock funds which I will mention below. But there are more different types of these bonds. This means that you will need to do your research for each mutual fund individually (in this type) in order to determine the amount of risk associated with it you are willing to take.
Stock Funds AKA Equity
This type actually carries the greatest risk alongside the greatest potential returns. Fluctuations in the market can very drastically affect the returns of equity funds.
Equity funds are the most popular type of mutual fund, but still do your research and see if you are willing to taje a lots of risk.
Money Market Funds
This type has the lowest returns because they carry the lowest risk of all the types which have been mentioned.
These funds are required to invest in high-quality and to do short-term investments that are issued by the U.S. government or U.S. corporations.
Balanced funds AKA Asset Allocation Funds / Hybrid Funds / Fund Of Funds.
This type of funds are invest in a mix of stocks, bonds and other securities.
An good example here is the target date fund, which automatically chooses and reallocates assets toward safer investments as you approach retirement age.