| A mutual fund is simply a financial intermediary | | | | A bond mutual fund is one that invests with |
| that allows a group of investors to pool their | | | | income as the first goal. Because bonds are a loan |
| money together with a predetermined investment | | | | to the issuer the value of the bond price varies |
| objective. The mutual fund will have a fund | | | | with changing interest rates. Bond funds can be |
| manager who is responsible for investing the | | | | bought and sold quickly and are considered more |
| pooled money into specific securities usually | | | | liquid than a direct bond investment. |
| stocks or bonds. When you invest in a mutual | | | | Here are some Bond Fund variations to consider. |
| fund, you are buying shares or portions of the | | | | Municipal bond funds which use tax exempt bonds |
| mutual fund and become a shareholder of the | | | | that are issued by government entities. Corporate |
| fund. | | | | bond funds which reflect debt obligations of U. S. |
| Mutual funds are considered by some to be one | | | | Corporations. Mortgage Backed Securities Funds |
| of the best investments ever created because | | | | which reflect residential mortgages. United States |
| they are very cost efficient and very easy to | | | | Government Bond Funds which use treasury or |
| invest in you do not have to figure out which | | | | other government securities. |
| stocks or bonds to buy. | | | | The strategic goal of a balanced fund is to balance |
| There are many varieties of mutual funds, and | | | | returns on current income and long term capital |
| each one will have different strategies and | | | | gains. Balanced funds tend to encompass a |
| different goals. Before you begin searching for | | | | quarter to a half of the portfolio in bond securities |
| your particular mutual fund match, you should | | | | in order to keep a high level of current income, |
| know what your investment objectives are. | | | | but the funds may shift the balance toward |
| Mutual Funds are categorized by their stated | | | | capital appreciation or back toward higher current |
| policies and objectives. The following is a list of | | | | income. The more fixed income securities bonds in |
| and descriptions pertaining to, a few of the most | | | | the portfolio, the higher the income will be. |
| basic types: | | | | Stock funds generally have a higher risk than |
| An equity income fund is a mutual fund that | | | | most bond funds and do not offer current |
| invests in high yielding common stocks and is | | | | income. Stock funds are used to increase value; |
| intended to provide current income and protect | | | | sometimes referred to as growing your money. |
| the invested capital. The funds invest mostly in | | | | Stock funds may also be called Equity Funds, |
| high value common stocks, some convertible | | | | Growth Funds, Value Funds, or Blend Funds. |
| securities and an assortment of preferred stock, | | | | Index Funds are hold a group of stocks that |
| junk bonds and high grade foreign bonds. | | | | focuses on a segment of the market. The |
| When your risk tolerance is high aggressive | | | | strategy is to match an index such as the |
| growth funds may be suited to your style. These | | | | Standard and Poor 500 or the NASDAQ. These |
| are what investors call speculative investment | | | | funds tend to have low operating costs because |
| vehicles, because they buy stocks from small, | | | | the point is simply to match an index. Index Funds |
| untested companies whose stocks tend to be | | | | may be international such as Global funds, Foreign |
| more volatile. | | | | Funds, Country Specific Funds, or Emerging |
| Aggressive growth funds are popular when the | | | | Market Funds, or Sector Funds which concentrate |
| market is doing well but when the market is | | | | on a segment of the market. |
| performing poorly, they can take substantial | | | | Growth and Income Funds are related to the |
| losses. The objective is to get big profits from | | | | Balanced Fund because the goal is to achieve both |
| capital gains. To achieve this goal, aggressive | | | | long term growth and current income. The |
| growth funds may use turnaround situations, buy | | | | difference is the primary strategic goal of big |
| on margin, use hedging techniques or sell short. | | | | capital gains. These funds can generate a big |
| The goal of a growth fund is to increase the | | | | return but increased risk is associated with the |
| value of the investment. This is called capital | | | | potential for good returns. Consider this type of |
| appreciation. The objective is long term growth | | | | fund if you can tolerate price volatility and tend to |
| with the end result of achieving hefty capital gains | | | | be a risk taker. |
| when the securities are sold. Growth funds | | | | As with all investment decisions, you should |
| generally put most of their investments into | | | | consult your certified financial planner to learn |
| stable, established large or mid-cap firms that | | | | more about the investment options best suited to |
| have better than average growth outlooks. These | | | | your financial needs. This article is not intended to |
| are seen as long term investment vehicles for | | | | be a substitute for expert advice from a financial |
| young aggressive investors who want to increase | | | | professional. |
| capital. | | | | |