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4 mutual fund types that will still be popular with investors in 2020

4 mutual fund types that will still be popular with investors in 2020

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Mutual funds have become very popular in recent years. Investors choose to invest in equity shares, money market funds, bonds, and hybrid funds. These funds have become one of the most popular ways for people to invest. Every fund is designed in a way to mitigate the risk and capture better market gains. However, some types of funds would have more risk than others. But this can also mean better potential rewards. It is time to take a look at the most common types of mutual funds that would be popular in 2020.

1.. Equity funds

No doubt, equity funds constitute the most common type of mutual funds. Most of the funds on the market are a type of equity fund. They have a better potential for growth but also higher volatility. Younger people should invest more in equity markets, according to the advice of most financial experts. Equity funds can be divided into several types depending on the goals of the fund. While there are industry or sector funds, these mutual funds can also be divided into large-, mid- and small-cap funds.

2. Bond funds

Among the fixed-income mutual funds, bond funds are probably the most common. Investors are returned a fixed amount on the initial investments. These bond funds have the second-most popularity in terms of mutual funds. Instead of buying stocks, these bond funds invest in corporate and government debt. Though they are a safer investment compared to stocks, their potential for growth is much less compared to equity funds. Investors who are nearing retirement should invest more in bond funds in their portfolio to protect the capital.

3. Money market funds

The money market mutual funds are fixed-income mutual funds investing in short-term debt from banks, governments, and corporations of high quality. These assets might be the treasury bills, commercial paper, and certificates of deposit. These are considered among the safest investments and constitute about 10% of the mutual fund market.

4. Balanced funds

The balanced mutual funds are also called asset allocation funds, which combine equity stocks and fixed income securities. The ratio is generally 60:40, the higher investments being towards equity. Some of these are target-debt funds. In these funds, the ratio of investments gradually changes from equities to debt as the bonds get closer to retirement.

In addition to these popular mutual funds for 2020, there are some other funds as well that are preferred by investors. Index funds are becoming common. These mutual funds mimic the market index. The index funds are becoming popular in recent years, though they are more common in developed economies. Index funds can vary according to the size of the company or the sector. Investors should put their capital in a variety of funds to ensure proper diversification, thus mitigating risks and maximising profits.