5 Best Types Of Mutual Funds
It's extremely difficult to choose the 5 best types of mutual funds. When it comes to mutual funds in the United States, there are basically three base types of funds. They include equity funds, fixed-income funds and money market funds. Choosing the right mutual fund is often a difficult task. The following 5 types of mutual funds are the best for the average investor:
- Money Market Funds. Money market funds are a good way to invest mostly in Treasury bills. This is probably the safest type of mutual fund you can possibly invest in. While you will never get great returns, you will not lose your principal. A money market fund is typically a better return than an interest earning saving account and less of a return than a CD. If you are looking for an extremely safe investment option, this is certainly the way to go.
- Bond/Income Funds. With this type of mutual fund, you are primarily investing in government and corporate debt. This is another fairly conservative investment option that usually results in steady cash flow. Bond and income funds generally provide a higher return than a CD, but do present minimal risk. The safest form of this type of investment is government securities.
- Equity Funds. Equity funds are some of the most common forms of mutual fund investments. These are funds with a long-term capital growth objective. Equity funds are a great option for long-term investment.
- Sector Funds. Sector funds are a type of specialty mutual fund where you invest into specific sectors of the economy. These are typically high-risk, but have a greater possibility of big gains. This is only for the investor who can afford to lose the money in case the sector tanks in value.
- Index Funds. Index funds are designed to replicate the performance of a broad market index. These are a great option considering the low fees involved. It's best to get into an index fund when the market is down, because it will eventually increase and bring you a return.