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Three main types of mutual funds
Stock funds — When you buy a stock fund, you become an owner of an interest in the companies your fund owns, and you participate in the growth of those companies.
Bond funds — A bond is essentially an IOU from the issuer of the bond. Bond funds generally hold bonds that provide regular income payments to shareholders. Bond funds may also buy and sell bonds to seek gains from appreciation in bond prices.
Money market funds — These funds invest in
very short-term securities and seek to maintain a stable $1 net asset value
per share, although there is no guarantee. Money market funds offer some income
and a high degree of safety, but no opportunities for growth through share
price increases. Money markets are neither insured nor guaranteed by the U.S.
government.
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