Low-risk mutual funds offer a variety of options, including money market, bond, and balanced funds. They can be loaded or non-loaded, and ETFs can serve as an alternative. Different types of mutual funds can meet specific investment goals, but expenses can affect profits.
The investor considering low-risk mutual funds will find a wide selection to choose from. Money market mutual funds are a low risk investment with a corresponding low return. There are bond funds available that offer different levels of risk. Government bond funds are considered safe, but rising interest rates tend to deflate bond prices. Balanced funds can be designed to mitigate risk while providing income.
Mutual funds are designed to meet specific investment goals. If risk mitigation is a priority, many different types of low-risk mutual funds may be able to achieve this goal. Some are designed with multiple strategies such as risk mitigation along with a monthly or quarterly income. Exploring the wide variety of mutual funds available will uncover the right type for a particular need.
Low-risk mutual funds can be either loaded or non-loaded funds. Load refers to expenses associated with the fund; they can be front loads, which are paid when the fund is purchased, or deferred loads, paid when the fund is sold. Expenses can take a large percentage of profits or add to losses. No-load funds are available in all categories of mutual funds.
US law requires a money market fund to invest in low-risk securities. They typically invest in government bonds and certificates of deposit. These low-risk mutual funds pay dividends comparable to short-term interest rates. Money market funds are not federally insured.
Bond fund categories include treasury, mortgage, corporate, and municipal. Treasuries are the safest but produce the lowest yields. Corporate bonds are guaranteed by the issuing company. The risk of default depends on the company’s ability to repay the loan when it matures. Municipal bonds are subject to certain tax credits and may be exempt from federal taxes. Mutual funds can be diversified into these categories.
Some balanced funds can be considered low-risk mutual funds. A balanced fund combines investments in stocks, bonds and low-risk securities. A conservative balanced fund may be geared towards a higher percentage of fixed income investments. Balanced funds are sometimes referred to as hybrid funds.
Low-risk Exchange Traded Funds (ETFs) can serve as an investment alternative to low-risk mutual funds. There are no management fees incurred with most ETFs. Treasury bills and municipal bond ETFs are very similar to mutual funds and fairly easy to trade. Unlike mutual funds, ETFs only incur capital gains taxes when the fund is sold. The ETF universe is expanding to suit a myriad of investment objectives.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
