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Different Types Of Mutual Funds

Views 49022022.06.23


Key takeaways

  • There are different types of mutual funds designed to meet various investment goals and risk appetites.

  • As the most popular type, equity funds provide the highest potential returns with high levels of uncertainties or risks.

Mutual funds offer an easy and smart way to diversify your investment, usually in stocks, bonds, debts, and so on. 

There are different types of mutual funds to suit investors' diverse investment goals and risk appetites. Understanding each type of mutual funds is vital for choosing the right fund that fits your investment strategy.

Types of mutual funds

Generally speaking, there are five common types of mutual funds: equity funds, fixed-income funds, money market funds, balanced funds, and index funds.  

Those mutual funds, with different features, have one thing in common: the risks are proportional to the returns. Some have high risks but high potential returns and some have low risks but average returns. Here's a detailed look at the most common types of mutual funds.

  • Equity funds

Equity funds are one of the most popular mutual funds, which give investors access to the stock market. 

Compared with other types of funds, equity funds may bring higher potential returns, but also have greater potential volatility. Therefore, they're more suitable for aggressive investors who pursue high returns. To spread around risks, equity funds usually build a portfolio of stocks over a range of industries.

  • Fixed-income funds

Fixed-income funds, also known as bond or debt funds, provide easy access for investors to participate in bond and debt markets.  

If you expect stable returns, these funds may be suitable choices. Unlike equity funds, fixed-income funds aim to have moderate but relatively stable returns by investing in government bonds, investment-grade corporate bonds, high-yield corporate bonds, and other debt instruments. 

  • Money market funds

Money market funds, another major type of mutual funds, often invest in short-term debt instruments such as Treasury bills, certificates of deposit, and government bonds. 

Money market funds can provide you with high liquidity, though low levels of risks and returns. Those instruments are generally short-term and high-quality interest-bearing securities, which makes money market funds a safer choice.  

  • Balanced funds

If you are looking for a combination of moderate returns with comparatively low risk, a balanced fund could be an ideal choice.

This kind of funds invest in various asset classes, including stocks, bonds and money market instruments. 

  • Index funds

Index funds are designed to track particular specific indexes, such as $S&P 500 index(.SPX.US)$ and $NASDAQ(200302.US)$ indexes.

These funds should mirror the performance of the underlying index. Unlike actively managed mutual funds, index funds provide a wide range of market exposure, but also offer lower transaction cost options because they rely less on fund managers.

The content in this article is intended for general circulation and informational purposes only. It does not take into account the investment objectives, financial situation or needs of any particular person and should not be relied on as advice or recommendation. Information provided in this article are not specifically intended for or specially targeted at the public in any specific jurisdiction. Neither Moomoo Inc. nor its affiliates are licensed Financial Advisers and do not provide financial advice. You are advised to consult your financial adviser before making any commitment to invest in any capital markets product. The information published is not and does not constitute or form part of any offer, invitation or solicitation to subscribe or to enter into any transaction in capital markets products. Moomoo is a professional trading app offered by Moomoo Inc. In the U.S., investment products and services on Moomoo are offered by Futu Inc., Member FINRA/SIPC. In Singapore investment products and services are offered through Futu Singapore Pte. Ltd., regulated by the Monetary Authority of Singapore (MAS). This advertisement has not been reviewed by the MAS. Moomoo Inc., Futu Inc. and Futu Singapore Pte. Ltd are affiliated companies. Any illustrations, scenarios, or specific securities referenced herein are strictly for illustrative purposes. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal.

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