Types of mutual funds
Picking your mix
With many different mutual funds to choose from, how do you distinguish one from another, let alone choose which ones to invest in?
Each fund has an investment objective. One might be long-term growth. Another fund might focus on providing income in the form of dividends paid by its investments. Mutual funds select investments (such as stocks, bonds or cash equivalents) to meet those objectives. Keep in mind that mutual funds are not guaranteed or insured by any bank or government agency. You can lose money. Every mutual fund carries a certain amount of risk.
Familiarize yourself with the different types of funds and their investment objectives below and then talk to your financial professional to find a good match for your own investing style and goals.
|Type of fund||Investment objective||Characteristics|
|Growth funds||Primarily invest in the stocks of companies that have the potential for above-average gains.||
|Growth-and-income funds||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).||
|Equity-income funds||Invest primarily in dividend-paying stocks and bonds.||
|Balanced funds||Invest primarily in a combination of stocks, bonds and cash equivalents. Seek growth of both capital and income over the long term.||
|Bond funds||Invest in bonds and are designed to provide regular income from interest paid by the bonds they hold.||
|Cash-equivalent funds||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.||
|Target date funds||Attempt to balance investors’ needs for both growth and stability by automatically adjusting fund holdings as investors near their retirement dates.||
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 or downloaded and should be read carefully before investing.