Mutual Funds for Retirees

When you retire you want income and possible some growth to keep up with inflation. In a perfect world ther would be investments that fit all your needs however it is possible to have both through a few types of mutual funds.

1. Growth and Income Funds - This has some risk due to the fact that it invests on both stocks and bonds however the risk is limited by the bonds. This is likely the highest returning investment of the mutual funds listed in this article.

2. Municipal Bond Funds - These funds invest in city bonds that pay interest which is tax free in some states. The higher the quality of the bonds in the fund the less risk but the less reward you will recieve. Bond funds allow you to make income as well as the appreciation of the mutual fund.

3. Corporate Bond Funds - These are taxable but have higher yields and can be broken down into two types.

a. High Grade Corporate Bond Funds - companies with a high probability of paying their debt and have been highly rated by a bond rating agency. The downside is that the return is usually not much higher that 4-7%.

b. Low Grade Corporate Bond Funds (Junk Bonds) - companies that are not financially stable and pay interest from 7-15% plus. High grade corporate bond funds are appropriate for most retirees while the low grade bond funds or junk bonds as they are commonly known, are not appropriate for retirement due to their high risk.

4.Government Bond Funds - These are funds that invest in government treasury bills, bonds, and notes. Nothing safer that the governement guarantee of payment. Most retirees keep a large portion of their retirement funds in government bond funds.

5. Money Market Funds - These funds invest in various bonds, mostly government and pay a slightly higher return than the government funds due to their lack of FDIC backing. Very low risk option while paying a few percent per year.

In conclusion, Investing in mutual funds for retirees is an option that has many choices. The above type of funds should give you a better understanding of the positives and negatives of each and make a more confident investment decision.