Highest Mutual Fund Returns
Mutual funds are a popular choice as an investment vehicle due to their high return rates. Rather than investing in one or two companies, mutual funds are designed to present less risk to investors through investment in a collection of various stocks and bonds. Buying into a mutual fund is like buying your own slice of an enormous pie. Generally, the highest mutual fund returns are made over a period of several years.
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Types
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Generally, mutual funds that present added risk to investors also provide potentially higher returns. The three primary types of mutual funds include money market funds, bond/income funds and equity (stocks) funds. Bond funds and money market funds offer a safe place to leave your money, but they also typically offer lower returns. Equity funds present increased risk on your part but some of the highest mutual fund returns.
Bond Funds
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A bond fund can invest in primarily U.S. government bonds issued by federal government agencies or the U.S. Treasury; corporate bonds issued by various corporations; municipal bonds issued by cities, states and local bodies of government; or high-yield (junk) bond funds investing in the debt of newer or smaller companies or larger struggling companies. Junk bonds present more risk but reward you with higher returns than safer bond funds -- typically, by 3 to 10 percentage points.
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Money Market Funds
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Money market funds typically invest in government securities, CDs and highly liquid, low-risk investments. If you are looking for a safe and stable way to invest some of your money, money market funds (not to be confused with money market deposit accounts offered by banks) usually perform at a steady pace, with the per-share net asset value (NAV) rarely ever falling below $1. They do not offer great returns, but with money market funds you will earn about twice what you would with the typical savings account at a financial institution.
Equity Funds
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Equity or stock funds are mutual funds that invest in stocks only. They are considered to be riskier than bond or money market funds, but they also offer potential for the highest mutual fund returns. Stock funds can be further categorized by the types of stocks in which they invest. Growth funds invest in stocks of companies experiencing rapid revenue growth. Aggressive growth funds take it a step further by investing in stocks of startup companies and those experiencing extremely rapid revenue growth and earnings, and trading is done more frequently than with growth funds. Aggressive growth funds are not for the faint of heart, and you should be aware they are highly risky and volatile investments. Value funds invest in stocks of mature companies that are no longer growing, but pay dividends from their earnings. Three other categories of stock funds include blend funds, which invest in both growth and value stocks; sector funds, which are riskier funds investing in stocks of a particular sector of the market (such as technology or real estate); and cap funds (large, small, mid and micro-cap), which invest in companies according to their value in the stock market.
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