There are essentially three mutual funds classes available to investors and each of them is divided by the rate of overall growth. Money market funds are the safest of the three choices since they are low-yield investments like treasury bills. Bonds are the second of the mutual funds classes, and they offer a fixed amount of return at a maturity date. Stocks make up the rest of the mutual fund classes; they offer the highest return on investment, but also carry the largest risk. A few of the mutual fund options also combine the conservative approach of bonds with the growth potential of stocks to provide an additional upside during strong markets.
Money market accounts are one of the more popular mutual funds classes for investors seeking a slow, guaranteed growth. While they only expand at an interest rate slightly higher than traditional savings and checking accounts, the profit is normally guaranteed at certain intervals. Usually money market accounts also have a minimum balance required to qualify for the earned interest, and this amount varies between institutions.
Bonds are another popular option offering limited growth for a set duration of time. These certificates can normally be purchased at a fraction of the face value, and each of them will have a maturity date that indicates when the bond can be traded for the full value. Savings bonds do not earn interest like the other mutual funds classes since the rate of return is predetermined.
Stocks are another popular type of mutual funds classes because of the diversity and the large growth potential involved with this investment. The appeal to investors is the ability to quickly move in and out of separate funds very quickly—at the same time, an exponential amount of risk is involved because each stock ultimately requires a buyer and a seller. Investment firms offer many different types of mutual funds classes that contain stocks ranging from conservative to high growth, so there is appeal for a wide variety of investors.
Another type of mutual funds classes combines different types of stocks and bonds to offer both high-yield and conservative investments inside a single fund. Asset allocation and precious metal funds have a potential for high growth while still being considered a low to moderate risk, and international funds combine both currency trading and foreign investments as a way to increase profits. While each of these is still technically considered a group of stocks, their diversity offers both high risk and the potential for tremendous profit.