There are two types of mutual funds: open-end and closed-end.  Open-end have limitless amounts of shares while close-end funds have a static number.  There are over 10,000 funds available to choose from.  Understanding the classification of each fund will help you determine the risk and potential return associated with it.   

The three basic asset classes of mutual funds are as follows:

1. Money Market funds – often based on Treasury bills, this class deals in short term debt.  This type of fund is incredibly safe but will not result in big returns.  This is a good option for someone wanting to earn more than a bank savings account but still keep his or her money safe.
2. Fixed-income funds – sometimes referred to as bond funds, income funds or fixed income funds.  The main objective of this type of fund is to provide consistent cash flow.  Bond funds mainly invest in Corporate or government debt.  Fixed income funds will usually out perform CDs or money markets but they do carry some risk.
3. Equity funds – Equity funds, which invest in the stock market, are the most common type of mutual funds available.    The fund objective can be somewhat different depending on the fund so you will need to do some research.   Equity funds carry greater risk but also have to he