Mutual Fund Basics
There are many types of mutual funds, each one having its own stated goals and objectives, which are outlined in their prospectuses. One mutual fund may focus on delivering long-term growth of income, and one may focus on long-term growth of capital. All mutual fund investing involves some level of risk, and there are mutual funds created for every level of risk. Keep in mind that mutual funds are not guaranteed or insured by any bank or government agency; you can lose money. Understanding what you want to achieve with your investment and talking with an advisor will help determine what types of funds to invest in to meet your goals. Here are the basic mutual fund types or investment asset classes.
The investment objective and characteristics give an overview of what to expect with each type of fund.
Primarily invest in the stocks of companies that have the potential for above-average gains.
Typically invest in stocks of companies that pay dividends and have good prospects for earnings growth. These funds also invest in bonds (which provide income).
Invest primarily in dividend-paying stocks and bonds.
Invest primarily in a combination of stocks, bonds and cash equivalents. Seek growth of both capital and income over the long term.
Invest in bonds and are designed to provide regular income from interest paid by the bonds they hold.
Invest in short-term securities such as U.S. Treasury bills and CDs. Although they’re not federally insured or guaranteed, they aim to preserve the initial investment.
Attempt to balance investors’ needs for both growth and stability by automatically adjusting fund holdings as investors near their retirement dates.
A mix of mutual funds selected to help investors pursue real-life goals within a framework of such common objectives as preservation, balance and growth.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.