Definition

Mutual fund is a collective investment scheme that pools funds from the public and is managed by an investment manager to be invested in securities such as stocks, bonds, and money market instruments.

Types of Mutual Fund

1. Money Market Mutual Funds
   ▪ 100% portfolio invested in money market instruments (deposits and debt securities with maturity less than 1 year)
   ▪ Least risky
   ▪ Limited return
2. Fixed Income Mutual Funds
   ▪ Majority of the portfolio (80% or more) is comprised of debt securities (bonds)
   ▪ Higher risk and return compared to money market mutual funds, but lower than balanced or equity mutual funds
3. Balanced Mutual Funds
   ▪ Portfolio proportion is not classified as money market, fixed income, or equity mutual funds
   ▪ Theoretical potential return and risk of balanced mutual funds are greater than fixed income mutual funds, but smaller than equity mutual funds
4. Equity Mutual Funds
   ▪ Majority of the portfolio (80% or more) is comprised of stocks
   ▪ Greatest potential for investment value growth
   ▪ Highest risk