Final answer:
Mutual fund types ordered from lowest to highest risk are money market funds, fixed income funds, balanced funds, equity funds, and specialty funds, with money market funds being the safest and specialty funds having the highest potential risk.
Step-by-step explanation:
When looking to correctly identify mutual fund types from lowest to highest risk, one would order them as follows:
- Money market funds
- Fixed income funds
- Balanced funds
- Equity funds
- Specialty funds
Money market funds are considered the safest investment, typically investing in government securities and other ultra-safe liquid assets, resulting in very low risks. Fixed income funds, which invest in bonds and other debt instruments, have a moderate risk level compared to equity and specialty funds. Balanced funds, a mixture of both equity and fixed income securities, offer moderate risk by combining growth potential and income. Equity funds, which primarily invest in stocks, have higher volatility and risk but also the potential for higher returns. Specialty funds tend to have the highest risk, as they often concentrate on a specific sector or region, which can be more susceptible to market fluctuations.