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Judul : In-depth Understanding on the Three Types of Mutual Funds
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There are three common types of mutual funds. These are:

- Bond Fund

- Balanced Fund

- Equity Fund

These different types of mutual funds have diversified portfolio depending on the risk appetite of the client. Typically, the portfolio of each type are as follows:

Bond Fund ~ 90% bonds | 10% stocks

Balanced Fund ~ 50% bonds | 50% stocks

Equity Fund ~ 90% stocks | 10% bonds

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Bonds can be in the form of government securities or corporate bonds. It is a way of obtaining money from the public (e.g. for government projects) and promising a percentage growth of the money. It is considered low risk especially government bonds as it is almost impossible that the government will default its own debt. The rate of return however, may not be very substantial because of its low risk nature. 

Stocks on the other hand are high risk in nature. Buying stocks is like buying a share of a certain corporation and trading it in the stock market in the hopes of earning a higher return. Therefore it is a high-risk, high-return type of investment. 

Now looking at these risk-reward ratios: the higher the risk, the higher the returns but the lower the risk, the lower the returns, we can then conclude that: 

Bond Fund - low risk, low returns (4 - 8% per year)

Balanced Fund - moderate risk, moderate returns (8 - 12% per year) 

Equity Fund - high risk, high returns (>12% per year)

Now knowing these risk-reward ratios, it can then be tempting to say, "I'd go invest then in equity funds because of its high returns." However, each type of mutual fund have different purposes and it is also important to know why and when to invest on each type. 

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In-depth Understanding on the Three Types of Mutual Funds

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