How much money can I make in mutual funds?

A large number of investors are investing in mutual funds to grow their money. As is the case with any investment instrument, your money can yield very high returns if you can plan strategically well backed by a thorough industry knowledge. You must also know that all mutual funds are not equally potential enough to assure a definite growth. Here are a few illustrations on the different kinds of mutual funds and how much you can earn from them.

Money market mutual funds which assure low returns

Money market mutual funds are types of mutual funds designed to provide a high degree of liquidity to the investors rather than assuring high returns. We can say these are cash like investments that give you returns depending on the existing short-term interest rates that can fluctuate both upward and downward based on market scenario.

Looking from a long term perspective, money market mutual funds produce an average returns between 3% and 4% per year. Over the recent years, money market mutual funds could hardly give any returns and they could produce close to zero percent earnings over the investments made. If you want to see mutual funds as a vehicle to grow your money, then you must stay away from investing in money market mutual funds that can hardly let you accomplish your goals.

Bond mutual funds which assure moderate returns

For the sake of boosting up the returns, a large number of investors invest in mutual funds that work by buying bonds. Bonds come with longer period of maturities than what the securities held by the money market mutual funds. Therefore, the companies issuing them are found to pay higher interest rates. One downside to this kind of mutual funds is the interest rate risk they carry. Hence when you invest in a bond fund, there are chances that your principal amount might suffer a loss.

In the long run, bond mutual funds have assured average returns between 5% and 6%. A typical bond fund can match such a kind of performance. At the same time, future returns under the existing conditions could work out to be lower than the average due to the low rate environment that had existed for a long time. The upside potential of the bond mutual funds is rather limited in most cases.

Stock mutual fund which assure high returns

If you look for the kind of mutual funds that assure the highest returns, then we must name stock mutual funds to fill in the blanks. Endowed with the potential to give the highest returns, stock mutual funds also carry greater risk. Over a period of time, majority of stock market funds have facilitated an average of 10% returns. Some higher risk funds connected to some riskier small company stocks have even given higher returns than that.

It is possible that the stock market funds will rise and fall in the market. From time to time, we can expect some dramatic downturns. If you are willing to accept the risks associated with the stock mutual funds, then you can enjoy the rewards of very high average returns in the long run.

Take home

There is no end to how much money you can make by investing in mutual funds. They can help you achieve any big financial goal you might have in your life. it is not possible to get rich overnight by investing in mutual funds. At the same time, their potential to help you earn a lot can never be underestimated.