What are the Types of Mutual Funds?
1. Bond Funds(Fixed Income) - These type of funds invest in government securities as well as some corporate issued bonds. These are the type of funds that has the lowest risk but also yields modest returns. Usually the average yield range from 4%-8% per annum. This fund is for conservative investors as well as people who are risk averse but considering its rate of return it is still better than most savings deposits and time deposits given its liquidity.
2. Stock/Equity Funds - These type of funds invest in variety of stocks and equities of publicly listed companies in the Philippine Stock Exchange. These funds generally has the highest potential rate of return but also has the highest risk. The average yield for these type of fund ranges from 12%-18% per year or even more. These funds are designed for aggressive investors as well as those investors seeking growth for the long term.
3. Balanced Funds - These type of funds combines profitability of equity investments and the stability of fixed income instruments. These funds generally allocates a portion of your investment to equities and a portion to bonds, this way the risk will be lower and the returns can be maximized. This is also one of the good choice of investment for conservative investors. The average yield of these type of funds ranges from 8%-12% per year or even more.
So what is the best fund for me? The answer lies in the needs of the investor and their investment objective. Well there are the type of funds you can choose from. Companies name funds differently so you better ask how the asset allocation will be as well as the potential returns and risk involved. Remember to always do your due diligence before going into any investment because nobody will be better to make decisions for our hard earned money than us.
In my next blog, I will discuss some concepts and techniques in investing. Watch out for that
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