Bond Mutual Funds
Bond mutual funds invest their money in bonds. Bonds are basically IOUs and can be issued by governments, states, local municipalities, and corporations. Instead of these entities borrowing money from the bank, it is considerably cheaper to go directly to the investors themselves. I talked about bonds in the previous chapter, and we saw that the average annual return on bonds for 94 years was 5.3%. Bond mutual funds tend to specialize in specific types of bonds, and these include the following:
- International Government Bond Funds
- U.S. Treasury Bond Funds
- Mortgage Bond Funds
- Corporate Bond Funds
- Municipal Bond Funds
- International Bond Funds
- Index Bond Funds
Stock Mutual Funds
Stock mutual funds invest their money in stocks (also called equities). There are many types of stock mutual funds. Some of the more popular ones are below:
- Growth Funds
- Capital Appreciation Funds
- Small-Capitalization Funds
- Mid-Capitalization Funds
- Large-Capitalization Funds
- Equity Income Funds
- Balance Growth and Income Funds
- Sector Funds
- International Stock Funds
- Index Funds
- Socially Responsible Stock Funds
Real Estate Mutual Funds
Real estate mutual funds invest the money in real estate stocks. The funds also tend to be specialized, so there are real estate stock mutual funds that invest exclusively in things like these examples:
- Large Shopping Mall Stocks
- Industrial Building Stocks
- Office Building Stocks
- Apartment Building Stock
Mixed Mutual Funds
Traditional, conservative investment advisors will tell you that you should have a mix of 70% stocks and 30% bonds in your portfolio. This is because stocks rise in price when the economy is in an expansion, and bonds rise in price when the economy is in a recession. There are plenty of mutual funds that offer a mix of stocks and bonds in various proportions, according to your risk tolerance. These usually have “Balanced Fund” in their name to signify that they have a mix of stocks and bonds.