So, you’ve decided to jump into the mutual fund
investment game. While mutual funds have shown themselves over time
to be a safer bet than regular stock trading, there is always the
chance you could lose your shirt. But the type of fund you choose
will have a lot to do with the amount of risk you take on and the
kind of return you’re looking for. For starters, mutual funds are
usually broken down into six main categories.
Equity mutual funds allow you to invest in
typical shares of common, everyday stock.
Fixed income mutual funds allow you to invest in
corporate or government securities that usually offer a set rate of
return on your investment.
Balanced mutual funds allow the investor to take
on a fund that includes both stock and bond options.
Maybe the safest form of mutual funds are known
as money market mutual funds. They offer a high degree of stability
for your principal, as well as high liquidity if you need to back
Bond mutual funds are popular since they invest
in tax free as well as taxable ones.
And finally, sector/speciality funds are used to
help diversify your holdings within a particular industry.
Each of these types of funds can be both
aggressive and risky with a high level of reward possible, or they
can be safer and lower risk. It all depends on which fund you
To break things down further, equity funds are
usually divided up into four different categories: Growth and Income
mutual funds, International mutual funds, growth mutual funds and
aggressive growth mutual funds. Each different type of fund has a
particular goal in mind. For some, it’s to aggressively pursue
income, even in risky situations, while others seek to preserve the
initial investment and only take smaller chances.
As you can see, the mutual fund landscape is
filled with so many options, it can make a newbie’s head spin. But
fear not, there is almost limitless information available on which
mutual fund is right for your particular investment strategy.
Not only do most mutual funds and those that run
them have their own website, there is endless advice as to which
fund is right for you on the Internet, as well. Remember to utilize
publications like the Wall Street Journal, as well as friends and
family who might have had particular luck with a specific fund.
Welcome to mutual fund investing!