Mutual Fund Types

We have already discussed the mutual fund cost and fees types and the expenses and fees associated with mutual funds, now we will discuss the five basic types of mutual funds.

Common stock funds

The first of the mutual fund types is the common stock funds. Common stock mutual funds invest almost entirely in equities or common stocks even though their mutual fund objectives vary considerably. Within the common stock mutual fund type, there are, for example:

• growth mutual funds,
• aggressive growth mutual funds
• growth and income mutual funds
• special purpose mutual funds
• index mutual funds

Income funds

The second mutual fund type is the income mutual funds whose portfolios consist of bonds and common stocks as well as preferred stocks.

Bond funds

The third basic type of mutual fund is the bond funds which seek high income and preservation of capital. The bond mutual funds invest primarily in bonds. They diversify by varying length of maturity.

Balanced funds

Balanced mutual funds buy both common stocks as well as bonds.

Money Market funds

The last basic mutual fund type is the money market mutual funds which offer shareholders the most security. Money market mutual funds are for short term investing because it is easy to liquidate money market mutual funds. This type of mutual fund is similar to cash or very short term investment vehicles.