A mutual fund is an investment vehicle which pools the money of many investors. There are various types of mutual funds. Each mutual fund has different risks and rewards. In general, the higher the potential return, the higher the risk of loss. The types of mutual funds vary according to the fund's investment objective.

Here in this article some of the basic types of mutual funds are described below. First and the most important type of mutual fund is Money Market mutual fund. These are highly liquid, high quality, short-term securities and which provide regular distribution of income which is determined by short-term interest rates. Money market funds are similar to treasury bills.

Investors who invest their funds for long term capital gains Growth mutual funds are good option for them. A growth fund invests primarily in the common stock of well established companies. Aggressive Growth funds is another type of mutual funds. These are highly risky investments because these funds invest in the common stock of small companies, out-of-favor companies or companies in new industries.

Investors who desire periodic income payments invest their funds in Income mutual funds. An income fund invests in corporate, government or municipal debt securities. Income funds offer its investors a regular income usually paid out in the form of monthly dividends. This is why this type of investment is called a fixed income fund. These funds carry more risk as compared to other funds.

Investors with investment objective of long-term capital growth with some income invest their money in Equity funds. There are many equity funds varies on basis of type of equities. Balanced funds offer the investors just the right mix of income, low risk, and appreciation. The fund invests in both equity and debt securities. The goal of this type of fund is to invest in a combination of all types of stocks to achieve a balanced and profitable investment portfolio.