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Types of Mutual Funds

With over 10,000 mutual funds in North America, there is a fund that fits most any investor's style.

It’s important to understand that each mutual fund has different risks and rewards. In general, the higher the potential returns, the higher the risk of loss. Though some funds are less risky than others, all funds have some level of risk. Even by diversifying among many investments it's never possible to diversify away all risk. This is a fact for all investments, including mutual funds.

Each fund has a predetermined investment objective that can be tailored in terms of assets, regions, investment strategies and any combination in between. Basically, there are three varieties of mutual funds:

1) Equity funds (stocks)
2) Fixed-income funds (bonds)
3) Money market funds

All mutual funds are variations of these three asset classes. For example, equity funds that invest in fast-growing companies are known as growth funds, while an equity fund that invests in companies in the same sector or region is known as a specialty fund.

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