Mutual Funds

Index Funds

What are the three main types of mutual funds?

The three main types of mutual funds are equity or stock funds, fixed income or bond funds, and money market funds. Stock or equity funds try to deliver positive returns to investors or shareholders by investing in the stocks of companies. Stock funds may be in one of several different subgroups, such as large capitalization, middle capitalization, small capitalization, and micro capitalization, depending on the size of the companies in which the management team is investing. Equity stock funds may also be grouped into various types of styles: growth, blended, and value. Growth funds typically try to deliver performance by investing in companies with very high earnings or profit growth that reinvest these earnings into areas that help continue to grow the business, including sales and marketing, product development, research and development, acquisitions, etc. These investments typically pay out little or no dividends or income; rather, they reinvest this income to fuel their longer-term growth (beyond five years). Blended funds have no fixed income or bond funds in their portfolios. They do have various equities that may generate returns to investors by increasing share prices, comprising both growth stocks (high-earnings growth companies) and value stocks (with share prices that may increase in value once the market realizes this). Bond or fixed income funds deliver returns to investors and shareholders by investing in a variety of fixed income or debt-driven investment vehicles and money market funds.



Close

This is a web preview of the "The Handy Investing Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App