Mutual fund types – additional information
Mutual funds are a form of collective investment. The investors’ money is pooled together and invested in selected financial instruments, according to the strategy defined in the fund prospectus. There are different types of mutual funds available to investors, corresponding to the return expectation and risk level that they are ready to take.
Equity funds are one of the most aggressive investment funds. They offer the possibility of high returns, but in the occurrence of turbulence in the financial markets, the investors might be faced with the loss of their invested capital. The assets of the equity funds are almost entirely invested in equities, with the remaining part of the assets invested in the money market instruments. Depending on the fund strategy, the fund can invest in the shares of global companies or companies located in a specific area, single country or a specific industry sector.
Bond funds offer a safer choice to investors. They invest in fixed income securities of maturity over one year, such as treasury bills, municipal bonds or corporate bonds. The bonds perceived as the safest are those offered by the governments of the most stable economies worldwide.
Mixed funds, on the other hand, invest a part of the fund portfolio in equities and a part in debt instruments. The more assets invested in equities, the more aggressive the fund is.