Taking stock of your mutual fund options can help you stay away from zeroing in on a particular investment strategy. As an investor, it is important to consider all of your options. Here are a few of the options that you have as a mutual fund investor.

Stock Mutual Funds

One of the most basic forms of mutual fund is one that focuses on stocks as the underlying asset. Many mutual funds utilize the strategy and have done so successfully for a number of years. The purpose of this type of fund is to pull investors money together and purchase thousands of shares of different securities.

There are many different management styles for this type of fund. For example, you could invest in a fund that uses mostly high risk companies to invest in. While this might be a little riskier, it can also provide you with a much higher return on your initial investment. By contrast, there are also a number of mutual funds that invest in secure companies. These companies are the cash cows of the industry and there is very little risk involved. This type of mutual fund is more suited to the risk-averse investor.

Bond Mutual Fund

Another type of mutual fund is the Bond mutual fund. This type of mutual fund utilizes bonds as the underlying asset. They could invest in corporate bonds, municipal bonds, treasury bonds and a variety of government bonds. Bonds are debt instruments that are issued to investors. The number of investors that can invest in bonds is limited because of the high dollar amount that is required to get involved. Bond mutual funds allow those with limited cash to get involved in the bond market.

Bonds, by nature, are a safer investment than many other options on the market. If a company that issues a bond goes bankrupt, those that hold the bonds still have a chance to get their money back. Therefore, when you combine this level of safety with the diversification that a mutual fund offers, you have a very safe investment. However, the returns that you can get from this type of investment are limited and will not usually compare to mutual funds that utilize stocks as their underlying asset.

Reverse Mutual Fund

Another option that you have in the mutual fund market is the reverse mutual fund. The reverse mutual fund allows you to take advantage of a declining market. If the market goes down you actually stand to win. This is not usually a good long-term investment as the market always trends upwards. Therefore, this is more of a timing play for more experienced investors. It can also be used to hedge the rest of your investments against a downturn in the market.

Index Mutual Fund

Another popular option is the index mutual fund. This is a mutual fund that aims to track a particular financial index. For example, a fund could track the S&P 500. Therefore, if the S&P 500 goes up you make a nice return on investment. This is traditionally a lower risk investment with steady growth.

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