According to their investment goals, four types of open-end investment funds can be distinguished:
Money-market funds invest in short-term debt securities and cash deposits. As their name indicates, these funds aim to protect the investments and shield them against inflation. These are funds that entail lowest risk. By investing in these funds, you will not earn high returns but also you will not have to fear a loss in value of your investment. The returns with these funds are typically higher than inflation and interest on bank deposits.
Income funds invest into debt securities. Although the value of the investment might grow the main goal of these funds is to provide regular income to their members. That is why mainly conservative investors and older persons invest in the funds as well as investors who opt for a decreased risk on their portfolios. The funds generate return which is higher than with the money-market funds at the same time entailing a higher level of risk. The riskiness of the funds might considerably differ depending on the issuer of securities the funds invest in. Moreover, the funds are exposed to the interest-rate risks – when the interest rates grow, the value of the income funds decreases.
Balanced funds invest in equity and debt securities. The aim of the funds is to provide a mix of safety, income and growth of invested assets. These funds are suitable for investors interested in moderate growth of their investments coupled with moderate risk.
Growth funds invest their assets in equity, their aim is to provide high returns in the short or long term. These funds invest the majority of their assets in shares and because of that they entail more risk than the mentioned funds. However, the riskiness of the funds might considerably differ depending on the issuer of securities the funds invest in and their investment strategies. Primarily younger persons invest in these funds and persons with tolerance for high investment risk.
Money-market funds invest in short-term debt securities and cash deposits. As their name indicates, these funds aim to protect the investments and shield them against inflation. These are funds that entail lowest risk. By investing in these funds, you will not earn high returns but also you will not have to fear a loss in value of your investment. The returns with these funds are typically higher than inflation and interest on bank deposits.
Income funds invest into debt securities. Although the value of the investment might grow the main goal of these funds is to provide regular income to their members. That is why mainly conservative investors and older persons invest in the funds as well as investors who opt for a decreased risk on their portfolios. The funds generate return which is higher than with the money-market funds at the same time entailing a higher level of risk. The riskiness of the funds might considerably differ depending on the issuer of securities the funds invest in. Moreover, the funds are exposed to the interest-rate risks – when the interest rates grow, the value of the income funds decreases.
Balanced funds invest in equity and debt securities. The aim of the funds is to provide a mix of safety, income and growth of invested assets. These funds are suitable for investors interested in moderate growth of their investments coupled with moderate risk.
Growth funds invest their assets in equity, their aim is to provide high returns in the short or long term. These funds invest the majority of their assets in shares and because of that they entail more risk than the mentioned funds. However, the riskiness of the funds might considerably differ depending on the issuer of securities the funds invest in and their investment strategies. Primarily younger persons invest in these funds and persons with tolerance for high investment risk.