Mutual Funds Part 2: Types

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In our last write-up, we gave our readers a what, why and why not of Mutual Funds. In this one, we will see how many types of Mutual Funds are there and the different aspects of market they cover. Let’s take a look –

TYPES OF MUTUAL FUNDS

Mutual Funds are of several types and for good reason. It depends upon a number of factors like what kind of securities they are investing in and what kind of returns they seek, along with the approach. Some of the major types of Mutual Funds are –
• Fixed-income funds
• Income funds
• Equity funds
• Money market funds
• Index funds
• Global funds
• Balanced funds
• Specialty funds
• Exchange traded funds
• Sector funds
• Alternative funds

Equity funds invest primarily in stocks and are the largest category when it comes to Mutual Funds. It also has a number of sub-categories based on the size or investment approach of the company. Fixed income funds or bond funds make a large category too and their primary focus stays on investments that have a set rate of return.
While Index funds follow major market index and thus need less research, Income funds invest mainly in government or high quality corporate debts. They hold onto bonds till maturity so as to provide interest streams and thus a steady income. This type is common among conservative investors.

Balanced funds or asset allocation funds invest in both stocks and bonds with the aim of asset appreciation with lower risk. Money market funds consist of risk free and short term debt instruments while Global funds invest only in assets located abroad.
Specialty funds are a broad category as well- including popular fund that don’t fall under any pre-conceived categories. Sector funds aim at specific sectors while Regional funds focus of specific geographical areas around the world.
Then there are Exchange traded funds and many others different types of Mutual funds with different structures and areas of focus.