Types of Investment Funds
1- Money market funds
These funds invest in short-term fixed-income securities such as government bonds, treasury bills, bankers’ acceptances, commercial paper and certificates of deposit.
The money market is a safe place to park your money that consists of safe (risk-free) short-term debt instruments, mostly government Treasury bills. You won’t get substantial returns, but you won’t have to worry about losing your principal. A typical return is a little more than the amount you would earn in a regular checking or savings account and a little less than the average certificate of deposit (CD).
2- Fixed income funds
These funds buy investments that pay a fixed rate of return like government bonds, investment-grade corporate bonds, and high-yield corporate bonds. They aim to have money coming into the fund on a regular basis, mostly through interest that the fund earns. High-yield corporate bond funds are generally riskier than funds that hold government and investment-grade bonds.
These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity in order to provide interest streams. so, the audience for these funds consists of conservative investors and retirees. Because they produce regular income, tax-conscious investors may want to avoid these funds.
3- Equity funds
Funds that invest primarily in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth. These funds invest in stocks. These funds aim to grow faster than money market or fixed income funds, so there is usually a higher risk that you could lose money.
There are many different types of equity funds because there are many different types of equities. You can choose from different types of equity funds including those that specialize in growth stocks (which don’t usually pay dividends), income funds (which hold stocks that pay large dividends), value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of these.
4- Balanced funds
These funds invest in a mix of equities and fixed income securities. They try to balance the aim of achieving higher returns against the risk of losing money. so, the objective of these funds is to provide a balanced mixture of safety, income, and capital appreciation.
The strategy of balanced funds is to invest in a portfolio of both fixed income and equities. A typical balanced fund will have a weighting of 60% equity and 40% fixed income. The weighting might also be restricted to a specified maximum or minimum for each asset class so that if stock values increase much more than bonds, the portfolio manager will automatically rebalance the portfolio back to 60/40.
5- Specialty funds
These funds focus on specialized mandates such as real estate, commodities or socially responsible investing. For example, a socially responsible fund may invest in companies that support environmental stewardship, human rights and diversity, and may avoid companies involved in alcohol, tobacco, gambling, weapons and the military.
for example, Regional funds make it easier to focus on a specific geographic area of the world. This can mean focusing on a broader region or an individual country. while Socially-responsible funds invest only in companies that meet the criteria of certain guidelines or beliefs.
6- Bond Funds
Bond funds invest and actively trade in various types of bonds. Bond funds are often actively managed and seek to buy relatively undervalued bonds in order to sell them at a profit. These mutual funds are likely to pay higher returns than certificates of deposit and money market investments, but bond funds aren’t without risk.
7- Global Funds
An international fund (or foreign fund) invests only in assets located outside your home country. Global funds, meanwhile, can invest anywhere around the world, including within your home country. It’s more volatile and has a unique country and political risks.