Getting Started

Choosing a Mutual Fund

Equity: Equity funds invest in stocks and seek to provide long-term capital growth.Equity funds typically offer higher potential returns than fixed-income or moneymarket investments but are considered to be more volatile.

Fixed Income: Fixed-income funds invest primarily in bonds or money-market securities.There are two main types of fixed-income funds: taxable or tax-exempt. Taxable fixed-income funds seek high current income while preserving capital by primarily investing in bonds and preferred stocks. Because bond prices fluctuate with changing interest rates, fixed-income funds do carry some risk, though they are considered more stable than equity funds. Tax-exempt fixed-income funds invest primarily in municipal bonds and seek current income free from federal (and sometimes state and local) income tax. Tax-exempt funds are considered to be a low risk investment.

Money Market: Similar to fixed-income funds, money-market mutual funds are ideal for very conservative investors seeking a virtually risk-free investment with an objective of preservation of capital while generating a modest income stream. Money-market mutual funds invest in high-quality, short-term cash investments like CDs, commercial paper, T-bills and bankers’ acceptances, but are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Balanced: Balanced funds invest in both stocks and bonds and aim to provide investors with both growth and income. The potential risk and reward offered by a balanced fund depends on the percentages the fund invests between equity and fixed-income securities.

Index: Index funds attempt to mirror the performance of a given stock exchange index (for example, the S&P 500) by purchasing the same securities in the same percentages. Although index funds are most cost-effective because they are not actively managed, they may not make portfolio adjustments to offset market lows.

Sector: Sector funds invest in the securities of a specific industry, such as utilities, precious metals, technology, healthcare or real estate. While sector funds can be ideal solutions for investors who, as part of an overall investment strategy, wish to focus on a particular industry and are able to closely monitor that industry, these funds often carry substantial risk for the average investor due to the concentration of their assets in just one area.

Classification of Funds

Style: Growth funds invest in the securities of well-established companies with anabove-average potential for growth. Growth funds are generally considered to be more risky than core or value investments but have a greater potential return. Value funds invest in companies that have fallen out of favor and are considered to be selling at bargain prices. Core funds invest in a blend of growth and value stocks, so can offer both the benefits and risks of those styles.

Geography: U.S. core, U.S. value and U.S. growth funds invest primarily in U.S. securities. Global funds invest in a combination of securities from both the U.S. and other foreign countries. International funds invest solely in foreign securities. You can also invest in funds that focus on a specific geographic country or region, such as Europe or Latin America. International and regional funds may have more risk than investments in global or U.S. funds, since foreign investing involves special risks — including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments.

Capitalization: Most asset management firms define market capitalization (total dollar value of all outstanding shares) categories as follows:


$50 - $300 million


$300 million - $2 billion


$2 billion - $10 billion


$10 billion - $200 billion


Greater than $200 billion

Generally the smaller the market capitalization, the greater the risk due to higher volatility in small-company stock prices and trading in lower volumes than securities of larger, more established companies.




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