There are four basic types of mutual funds currently available in the market categorized according to the investment objective of the fund or the investments that the fund is primarily invested in.
- Money Market Funds invest purely in short-term (one year or less) debt instruments.
- Bond Funds invest in long-term debt instruments of governments or corporations.
- Balanced Funds invest both in shares of stock and debt instruments.
- Stock Funds / Equity Funds invest primarily in shares of stock.
If the NAVPS of the mutual fund you are invested in increases or appreciates, you can sell your mutual fund shares for a profit. In the same way, if the NAVPS of the mutual fund you are invested in decreases or depreciates, you may realize a loss if you redeem.
Like any other investment instrument, mutual funds are best held long-term especially for mutual funds that have investment objectives of capital growth such as equity funds.
Get Bright Ideas about Mutual Funds with Make it Mutual.