Best Mutual Funds Explained
All you need to know about mutual funds, including the risks, rewards and terms  

Best Mutual Bond Funds

best mutual fundsNow with bond funds, the key word here is conservative with a small 'c' - if your appetite for risk is limited and you prefer a steady regular income without the adrenaline rush of stock funds, then these may be the best mutual funds for you. I group this type of mutual fund into four distinct groups, and while it is true that bonds generally provide a more conservative form of investment, it is possible with one group to invest in bonds which have the ability to perform more spectacularly, but as with everything in trading, this can be both up and down. The four broad groups are US bond funds, Corporate bond funds, Municipal bond funds and finally High Yield bond funds which are often associated with junk bonds of Michael Milken fame, also known as the Junk Bond King - it's an interesting story and Milken himself only spent 2 years in prison from the original sentence of ten years, after a plea bargain.

Best Mutual Bond Funds - US Government Bond Funds

As you would expect these are backed by the US Government, and therefore extremely safe, but as always that safety comes at a price, which of course is the slightly lower return that you will receive on such bonds. Now please don't run away with the idea that the value of the bonds remains fixed - they don't - but naturally they won't move as much as others in the market. If you are prepared to buy and hold for the long term then these may be the best mutual funds for you, if you prefer relatively low risk for a reasonable return over the period.

Best Mutual Bond Funds - Corporate Bond Funds

Now the name can be misleading, and many investors rush into the market buying what they assume are bonds issued by blue chip companies - most are, but some are not, as many fund managers like to increase volatility by adding higher risk bonds from smaller, or unknown companies. So when looking at a mutual corporate bond fund, make sure you check the credit rating of the companies concerned. The top rating is AAA, and the minimum should be A3.

Best Mutual Bond Funds - Municipal Bond Funds

Municipal bonds are an interesting group as they provide a tax free investing option. Municipal bonds are issued by the local authorities to fund major infrastructure projects such as roads and bridges. Provided you live in the state that has issued the bonds then these are free of Federal tax, and also local state taxes. For high rate tax payers this can be extremely attractive, as the returns will often be better than the other forms of bond funds once the tax saving has been taken into account. So for higher rate tax payers, these could be the best mutual funds.

Best Mutual Bond Funds - High Yield Funds

As I mentioned earlier this is really another name for junk bonds - probably an appropriate description although it can be a little misleading, as everything is relative. Make no mistake, these are high risk but excellent returns if your heart and blood pressure can stand the strain - movements of between 10% and 15% are not uncommon when the markets are turbulent so you do need to have nerves of steel - not everyone's cup of tea but they do have a place in the market. The risk of course is that the company may default on the interest payments - but as I keep saying risk and reward go hand in hand in investing. If you like high risk then these could be the best mutual funds for you.

Now, having looked at bond funds, let's take a look at money market funds in our search for the best mutual funds on the market.

Best Mutual Funds - next page