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 Today there are literally thousands of mutual fund offerings on the market, ranging from funds with a broad variety of investment opportunities to funds that specialize in single securities that make up a more narrow sector of the market. With so many to choose from, and each with its own expense, risk and return characteristics, it's important to choose funds which fit your investor profile. • Growth Funds • Balanced Funds • Growth & Income Funds • Aggressive Growth Funds • International and Global Growth Funds • Government Securities Funds • Money Market Funds • Municipal Bond Funds • High Yield Bond Funds • Corporate Bond Funds • International Bond Funds • Specialized Types of Mutual Funds • Growth Funds: Growth funds complement an investment strategy that places a greater emphasis on long-term appreciation than on short term dividend earnings. These funds feature investments in the stocks of established companies with growth potential. Growth funds may be limited to specific sectors of the economy. Go back to the Top • Balanced Funds: If your investment strategy calls for a lower risk way to obtain a higher potential return on your investment, balanced funds may be right for you. Combining a varied mix of stocks, bonds and cash reserves, balanced funds are generally less risky than other funds and seek balance between growth and income. • Growth and Income Funds: Growth and income funds are invested primarily in high-yield common stock, preferred stock and convertible debt bonds that seek to achieve both long-term growth and current income. Their diversity of investments generally makes these funds less risky than growth funds. Go back to the Top • Aggressive Growth Funds: Often called "small-cap" funds, aggressive growth funds seek to invest in smaller companies whose stocks generally pay little or no dividends. These funds are selected for maximum capital gains and tend to be the riskiest of growth-oriented mutual funds. Go back to the Top • International and Global Growth Funds: While international mutual funds invest only in foreign securities through international stock markets, global funds can invest in both foreign and U.S. securities. There are different risk factors associated with investing on a worldwide basis, including currency exchange differences, differences in the regulation and reporting of financial data, and variances in economic and political systems. Go back to the Top • Government Securities Funds: Consisting of Treasury and government agency securities, these are considered to be some of the safest of all mutual funds because their underlying securities are issued or guaranteed by the U.S. government as to the timely payment of interest and the return of principal. Treasury securities are backed by the full faith and credit of the U.S. government, while government agency securities are not. Changes in interest rates will cause the principal value of these funds to fluctuate. Go back to the Top • Money Market Funds: Money market funds offer the lowest return but are the least volatile of all fund types, earning only modest current income and no potential for capital gains. These funds can provide current income while seeking to maintaining a stable $1.00 per share net asset value. Investments are primarily in treasury bills, certificates of deposit, commercial paper and other highly liquid and safe securities. It is important to note that money market funds are not insured or guaranteed by the FDIC or any other government agency and it is possible to lose money. Go back to the Top • Municipal Bond Funds: While municipal bond funds seek federal income tax-free income by investing in the bonds of state and local governments, it is important to consider all your options in this area. Municipal bond funds issued by the state in which you live are attractive because they are usually exempt from both federal and state income tax. Bonds which are offered by other states often require you to pay income tax on their earnings. While some municipal bonds in the fund may not be subject to regular income tax, they may be subject to federal, state or local alternative minimum taxes. Keep in mind that the fund's principal value will fluctuate with changes in the interest rate, and there are also capital gains to consider when selling tax-free bonds at a profit. Go back to the Top • High-Yield Bond Funds: While high-yield bond funds offer the potential for a high-yield return on your investment when compared to investment grade bonds, the down side is that they also carry a greater risk factor. Usually rated BB or lower by rating agencies, high-yield bond funds are of lower quality and contain a much higher risk of default. Because of their higher volatility, these bond funds are more suited to investors who are seeking to maximize current income, and who are willing to accept a higher degree of risk tolerance. Go back to the Top • Corporate Bond Funds: These funds offer investment opportunities only in debt securities issued by corporations, and their risk factor may vary depending on the objectives of the fund. These funds often offer higher returns than those specializing in government securities, and changes in interest rates may cause the principal to fluctuate. Go back to the Top • International Bond Funds: International fixed-income funds invest in securities of foreign governments and corporations, as well as U.S. government and corporate bonds. Often called "Global Bond Funds," these funds are designed to provide current income. There are different risk factors associated with investing on a worldwide basis, including currency exchange differences, differences in the regulation and reporting of financial data, and variances in economic and political systems. Go back to the Top Specialized Types of Mutual Funds In addition to mutual funds which are designed to provide growth and income, there are many investment opportunities that limit their investments to a particular sector, index or other specialized area of investment. These funds may be a smart addition to a portfolio that contains more traditional types of funds. • Asset Allocation Funds • Precious Metal Funds • Index Funds • Sector Funds • Socially Conscious Funds • Asset Allocation Funds: Asset allocation funds allow the fund manager the flexibility to invest in all the major investment classes. These include stocks, bonds and money market securities. Weightings of each class may vary dramatically, with investments closely following the fund manager's expectations and the market outlook. Go back to the Top • Precious Metals Funds: Today, most precious metals funds limit their investments to gold and gold bullion, or to shares in gold-mining companies. Investments are made directly in these precious metals or in the stocks of companies that mine these metals. These specialized mutual funds appeal to investors seeking long-term capital appreciation. Go back to the Top • Index Funds: Index funds attempt to match the performance of any of several market indexes, including the Standard & Poor 500 and the Dow Jones Industrial Average. These funds are attractive to investors wishing to create a broad diversification within a single type of asset class. Market indices are unmanaged and representative of large and small domestic and international stocks and bonds, each with unique risks. You cannot invest directly in an index. Go back to the Top • Sector Funds: These are very selective funds invested in specific industries or sectors of the economy. Sector funds lack broad diversification, although it is possible to diversify within a particular sector such as aerospace, computer technology, communications, health care or defense. Because they lack diversification, these funds represent a greater degree of risk and should be approached by investors seeking long-term appreciation. Go back to the Top • Socially Conscious Funds: Socially conscious funds are chosen exclusively on the basis of a company's performance and commitment to certain social issues or standards. Typically, these types of funds are rarely invested in companies that pollute the environment or have interests in countries with repressive governments. Disclaimer: Securities products are sold by prospectus which contains important information. Please carefully consider investment objectives, risks, charges and expenses before investing. For this and other information, please obtain a prospectus from your registered representative for the product you are considering and read it carefully before you invest. |
Investment Opportunities & Options • Investment Portfolio Diversification • Stock & Bond Alternatives • Mutual Funds • Mutual Funds vs. Stocks • Traditional IRAs and Roth IRAs Banking Opportunities & Other Savings Alternatives • Savings Alternatives |
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