Balanced Funds:Balanced funds combine stocks and bonds, usually in a 60-40 mix. The stock portion often is invested in blue-chip shares, while the conservative segment is typically given over to longer-term bonds.
The idea is that balanced funds give you one-stop shopping. But they fall far short of that goal. What if the 60-40 mix is too aggressive or too conservative for you?
For those considering just holding one fund to achieve their goals, buying a balanced fund is tantamount to going into a shoe store and buying a pair of shoes without worrying about the size!
Money Market Funds:
They are essentially mutual funds that invest solely in government-insured short-term instruments.
These funds nearly always reflect the current interest rates, and rarely engage in interest-rate speculation.
Bear-Market Funds:
Market timing is bad enough! Bear-market funds take that mistake, and make it worse!
These funds bet that either individual stocks or the entire market will fall. This is a loser's game, because share prices go up over time!
Convertible-Bond Funds:
Convertible bonds are bonds that can be swapped for the issuing company's stock at a predetermined share price. So what are convertibles, a stock or a bond? Therein lies the question!
Convertibles may appeal to bond investors who are so nervous they can't bring themselves to buy a pure stock fund but want some backdoor stock-market exposure.
But for those who already own regular stock and bond funds, it is difficult to see much reason to buy these funds.
Load Funds:
Mutual-fund sales commissions are used to compensate brokers who sell funds. Don't need a broker's advice? There is no reason to pay a load!
High-Expense Funds:
At the super market, price may bear some relationship to quality. But when it comes to fund management, you don't get anything special for paying a lot in annual expenses!
In fact, high-expense stock, bond and money-market funds tend to lag behind their low-cost competitors. As a result, you would be well advised to stick with stock funds with expenses below 0.9%, bond funds that charge less than 0.7% and money funds that levy less than 0.5%.
Commodity Funds:
Commodities mutual funds are those investing in certain designated real assets or their derivatives like futures contracts (instruments that facilitate investment in commodities). The commodities or the derivatives are traded for maximizing profits.
All said and done there are no commodity mutual funds in real terms and all those trading in commodities are hedge funds (hedge funds are for big time investors who can pool in excess of $1 million for the purpose of trading in commodities).
In a way commodity mutual funds are scaled down versions of hedge funds that provide a chance to retail investors to take a look at commodities market who otherwise were not able to.
