There are several different types of mutual funds, including stock funds, target date funds, bond funds and money market funds, as reported by the U.S. Securities and Exchange Commission (SEC). Stock funds may also be known as equity funds, and bond funds may also be known as fixed-income funds, according to Investopedia. Each of these fund types offers a different potential level of risk and return.
Within the larger category of stock funds, there are smaller subtypes that investors can choose from, including index funds, growth funds, income funds and sector funds. Differences in these types of stock funds focus on factors such as whether or not dividends are paid and what market or industry the stocks are associated with, as described by the SEC.
Among the four types of mutual funds listed by the SEC, money market funds may be among the least risky. This type of mutual fund includes corporate and government investments. Bond funds are believed to be more risky than money market funds, but they may offer higher returns, making them appealing to investors who are not particularly risk-averse.
Investors who want a diverse portfolio may be particularly interested in target date funds, which often include a mix of stocks, bonds and other investment products. As the name implies, these funds target a specific date for the investor, such as a retirement date.