Money Market Funds2.
This is the lowest-risk mutual fund, designed to keep your money safe until you need to access it. You could use this fund for an emergency account. The fund allows you to write checks to withdraw money but usually has a maximum number of checks you can write each year and a minimum amount.
A bond mutual fund is typically low-risk and helps add stability to your investment mix. When the stock market drops, more conservative bond funds can help balance out your higher-risk investments. As you near a specific goal like paying for college, think about moving that savings into a bond fund, designed to preserve your savings. The value of bonds will decline in value as interest rates rise.
A stock mutual fund is a higher-risk investment and may be a more suitable choice when investing for the long term. As the name implies, these types of funds typically invest in common stocks found on the stock exchange. The stock market can be more volatile in the short term, but if your retirement money will be growing for as much as 20 or 30 years, stock mutual funds offer the potential to grow your savings over time.
Target Date Funds.
A target date mutual fund is designed with a specific year in mind and takes care of asset allocation and rebalancing for you. For example, you choose the date when you plan to retire, say 2030. Over time, the fund will automatically rebalance to an appropriate blend of investments and become more conservative to help protect your savings as you get closer to your 2030 "target date" of retiring. The principal value of the funds is not guaranteed at any time, including at or after the target.