| This basic investment guide should make picking | | | | invest in bond funds. Bond fund share prices |
| and understanding a mutual fund investment | | | | flucuate, so there is risk involved in these mutual |
| simpler for you. Picking a fund that fits you is not | | | | fund investments. |
| rocket science once you know your basic choices. | | | | STOCK FUNDS are the most popular and the |
| Our basic investment guide will classify mutual | | | | riskiest type of fund. The price of their shares will |
| fund investments into four categories based on | | | | flucuate, sometimes going to extremes. When |
| what a fund invests in, where they invest your | | | | you hold shares in a stock fund you are invested |
| money. The vast majority of funds fit into one of | | | | in stocks. Generally speaking, as goes the stock |
| these categories: money market funds, bond | | | | market, so goes the value of your stock fund. |
| funds, stock funds, balanced funds. | | | | The objective of these funds: growth (higher |
| MONEY MARKET FUNDS are the safest of all | | | | returns), perhaps with modest income from |
| mutual fund investments. They pay investors | | | | dividends. There are many varieties including |
| interest in the form of dividends. The price or | | | | growth funds, value funds, international funds and |
| value of their shares does not fluctuate. Money | | | | specialty funds. |
| market funds invest your money in high-quality | | | | BALANCED FUNDS are a blend of the other three |
| safe short-term IOU's of the U. S. government, | | | | just discussed. A traditional balanced fund is a |
| banks, other major corporations, and/or other | | | | mutual fund investment that invests almost 60% |
| government entities. As interest rates go up, | | | | of its assets in stocks, almost 40% in bonds and |
| interest earned and dividends paid by these funds | | | | what little remains in short-term debt (the money |
| do also. When rates fall, dividend yields fall. Money | | | | market). So, if you hold shares in a balanced fund, |
| market funds offer investors high liquidity. You | | | | you are invested primarily in both stocks and |
| can get your money out of them quickly and | | | | bonds. Newer types of balanced funds include |
| easily, at no cost with little fear of loss. | | | | lifestyle funds and target retirement funds. These |
| BOND FUNDS are the second type of mutual | | | | can be conservative, moderate, or aggressive in |
| fund investment, and are the second safest. They | | | | nature. |
| invest in long-term debt instruments called bonds. | | | | MUTUAL FUND INVESTMENT GUIDE SUMMARY |
| The bonds held by a bond fund can be long term, | | | | MONEY MARKET FUNDS for high safety, liquidity, |
| intermediate term, or shorter term in nature. | | | | current income. BOND FUNDS for higher income, |
| They can be issued by the U.S. government, | | | | with only moderate safety. STOCK FUNDS for |
| other government entities, and corporations. | | | | growth, perhaps with income, with significant risk. |
| Municipal bond funds pay dividends that are | | | | BALANCED FUNDS for moderate growth and |
| tax-exempt or tax-free. Investors in search of | | | | income, risk depends on specific fund. |
| higher income in the form of dividends often | | | | |