When you invest in a mutual fund, your money is pooled together with the funds of other investors and companies. The accumulation of funds is controlled by a fund manager. However, the type of mutual fund you invest in will significantly affect the fund manager’s goals, as well as the rewards you receive from your participation. Below is an overview of some of the most common types of mutual funds.
A Guide to Common Mutual Funds
1. Equity Funds
With this type of mutual fund, you’ll be investing in a publicly traded company. As a result, these investments can be unpredictable, and are vulnerable to sharp fluctuations in value. However, they’re known to follow a more stable trajectory over a longer period of time. There are a number of other subcategories within this general group—while income stock funds pay regular dividends to investors, sector funds are driven by particular industries, and growth funds offer the highest chances of substantial capital appreciation.
2. Fixed Income Funds
When you invest in a fixed income fund, also known as a bond fund, your money will be put toward government or corporate debt. In return, you’ll receive regular dividend payments. These might offer extreme rewards, and they’re also a great supplement to your investment portfolio, as they boost your overall return and provide a buffer when stock funds drop.
3. Money Market Funds
These mutual funds are the most low-risk option for investors. Essentially, they allow you to participate in short-term, high-quality investments that are issued by domestic corporations, as well as those issued by federal, state, and local governments. Net asset value, or the value of one share, must be kept at $1 by law, but it may be subject to decline. While these mutual funds are safe, they’re also known to produce lower returns, which means inflation may affect the value of the money you invest.
If you have questions about mutual funds and want to speak with an expert about your options, turn to Jeffrey T. Quinn Agency of Meadville, PA. Since 1992, they’ve helped their clients protect and grow their investments through insurance policies, retirement planning, and investing in mutual funds. To learn more about their trusted policies and affordable services, visit the website. Call (814) 337-2766 to speak with an insurance agent today.