Personal Finance and Money Management 17 – Types of Mutual Funds


As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In this article, we will discuss types of mutual fund.

Mutual fund is a pool of investor’s money and is sold as a unit. It is an open end fund and managed by professionals. It also must meet certain regulations of the security commissions and laws governed before it can be sold to the general public. There are 4 types of mutual funds depending to the fund objectives:

1. Balance fund

a) Their purpose is to maximize a balance of capital appreciation and income, yet preserve capital.

b) It contains a combination of debt and equity securities. The proportions of bond and security are adjusted according to economic conditions.

2. Equity fund

a) Dividend fund

i) Invested in dividend-paying stocks.

ii) Maximize income by specializing in stocks paying high dividends.

iii) Allows investors to take advantage of the dividend tax credit, but they don’t give many capital gains dividends.

b) Growth fund

Invested in common stocks for capital appreciation.

There are 3 types of equity growth fund

i) Broad spectrum funds: invested in any company with growth potential.

ii) Market segment funds: invested in a specific sector of the market, such as oil and gas, precious metals, commodity, or high technology.

iii) International funds: invested in specific countries such as China, Japan, Russia, and European countries.

3. Specialty fund

Specialty funds have the below characteristics:

These types of fund investments are strictly in specific commodities, such as gold funds only allowed to invest in gold bullion or gold certificates, real estate funds only allowed to invest in property, Oil and gas only allowed to invest in oil and gas producing companies, as indicated in the fund prospectus.

Source by Kyle J Norton

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