What type of mutual fund should i invest in if....?

Question

I want low risk and a high amount of liquidity? I want to save at higher rates of return than a bank can offer but if i wish to purchase a home soon, I want to have access to the money.

Answer 1

I am a great advocate of stock funds for retirement plans. But if you are investing for a house you want to buy in the next 1-2 years, you want to invest conservatively. Stocks can crash. Consider the Vanguard Prime Money Market Fund with a current yield of 5.10%:
https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0030&FundIntExt=INT
If you are in a high tax bracket you may prefer their Tax exempt money market funds:
https://flagship.vanguard.com/VGApp/hnw/FundsByType
Sometimes other institutions will have a higher teaser rate, but Vanguard tends to have the highest yields I've found over the long run.

Answer 2

short term with liquidity and higher returns means higher risk. Mutual funds, both equity and bond types, are for long term investing. Many fund families will charge you a fee if you sell within 6 months or so. Have you tried www.bankrate.com to fund the higherst rates in the nation on bank accounts/money market funds?