| For the novice investor, mutual funds seem like a | | | | would choose this type of fund if they simply |
| great investment vehicle. They offer managed | | | | want to stay up with market performance, or |
| investing, diversification, and SEC regulation. They | | | | they cannot decide which other type of fund to |
| are often the first place a financial advisor will | | | | invest in. |
| send someone new to the stock market. But | | | | Sector Funds |
| they come with their own complexities, which | | | | Sector funds focus on stocks of companies in a |
| often get overlooked. Here we will attempt to | | | | certain industry or market sector. For instance, |
| demystify the different types of mutual funds | | | | you might fund sector funds that invest in just |
| and why one might choose that type as their | | | | biotech, oil and gas, electronics, or banking. |
| investment medium. | | | | Performance of these funds is highly depending on |
| The first and major type of mutual fund is the | | | | how well that industry is doing. They are more |
| stock fund, also called an equity fund. These funds | | | | vulnerable to changes in a certain market sector |
| invest in shares of stock from various companies | | | | than other funds, but also allow for significant |
| they deem to have benefit within the fund | | | | profit from a sector that is doing well. |
| portfolio. | | | | International Funds |
| Growth Funds | | | | International Funds are just that - funds that |
| Among the stock funds, the Growth fund is one | | | | invest in international companies. If you have |
| of the most popular. This type of fund invests in | | | | heard there are some great opportunities |
| growth stocks; stocks of companies who are | | | | oversees, maybe in China or India, this might be a |
| developing new products and services, are in | | | | fund for you. You purchase shares of these funds |
| good financial order, and are expected to grow | | | | with U.S. dollars and the fund takes care of |
| faster than other similar companies in the market. | | | | purchasing the various shares of stock in the |
| Value Funds | | | | currency of that country. This is an easy way to |
| Value funds, on the other hand, invest in | | | | get access to emerging markets outside of the |
| companies that the fund managers feel are | | | | United States. |
| undervalued by the market. They may have had | | | | Other types of mutual funds are Bond funds, |
| issues with management or a product, or maybe | | | | which consist of bonds from either U.S. |
| they are great companies but most investors | | | | Government, Corporate, Municipal or International |
| haven't picked up on them yet. These funds | | | | entities. Total Return Funds combine the two |
| make a profit when their companies improve in | | | | types, investing in both stocks and bonds, to |
| either profitability or popularity. | | | | attemp to attain both income and appreciation. |
| Index Funds | | | | Finally, you can also invest in Money Market Funds, |
| Funds that invest in the same companies as the | | | | which invest in various short-term money market |
| major indexes are called Index Funds. They | | | | loans. You might choose a Money Market Fund if |
| generally track along with the index they are | | | | you want low-risk and are willing to settle for a |
| targeting. One of the more popular index funds | | | | modest gain. |
| follows the S&P 500 index. An investor | | | | |