So you have decided to buy a mutual fund but you are not sure what type of mutual fund to invest in. Well, let's take a look at the different types of mutual money you must select from. The two main categories of mutual money are: Equity, Bond, and Mixed. Equity money invest in stocks, bond fund invest in bonds, and mixed money invest in both stocks and bonds.
Another popular type of mutual fund is a sector fund. This is similar to an index fund except it's a narrower focus. Specific types of sector mutual money are utilities, natural resources, technology, biotech, pharmaceuticals, and energy. Fundamentally, a sector mutual fund is a group of stocks from a specific industry. If your sector does well your mutual fund will do well. If your sector performs poorly, your mutual fund will suffer.
While bond mutual money can fill a specific need, the majority of money are equity money. Equity money can be further classified in to lots of different categories. I will explain the most common categories. A popular type of mutual fund is an index fund. An index fund tries to closely match the holdings of a particular index such as the S&P 500, the Dow Jones, or the NASDAQ 100. The value of an index fund will move up and down with the index. For example, if you own a S&P 500 index fund and the S&P 500 goes up, your index mutual fund will increase in value. Conversely, if the index goes down, the value of your mutual fund shares go down.
Equity mutual money can also be broken in to investment aim. The one most common classifications are growth money and value money. Growth mutual money look to invest in companies that have shown consistent growth and are likely to continue to produce steady growth. Value mutual money try to find bargain stocks or companies that are currently out of favor with investors but are sound fundamentally and undervalued.
Yet another classification of mutual money is based on stock size such as small cap, mid-cap, or giant cap. While the exact classifications can differ, a small cap stock generally has less than 1 billion in market cap (the stock price x the number of shares outstanding) and a giant cap stock has over 5 billion in market cap. A mid-cap stock is somewhere in between. Most giant cap companies are widely known companies such as GE, Exxon, or Microsoft. Small cap companies offer higher returns but they are also more hazardous.
Finally, mutual money can be domestic, foreign, or international. An international fund is generally a combination of U.S. companies and foreign companies. Foreign mutual money can be further classified in to regions (Latin America, Asia) or country. While this is not a complete list of mutual fund types it should help explain lots of of the types and choices available to the mutual fund investor.
Another popular type of mutual fund is a sector fund. This is similar to an index fund except it's a narrower focus. Specific types of sector mutual money are utilities, natural resources, technology, biotech, pharmaceuticals, and energy. Fundamentally, a sector mutual fund is a group of stocks from a specific industry. If your sector does well your mutual fund will do well. If your sector performs poorly, your mutual fund will suffer.
While bond mutual money can fill a specific need, the majority of money are equity money. Equity money can be further classified in to lots of different categories. I will explain the most common categories. A popular type of mutual fund is an index fund. An index fund tries to closely match the holdings of a particular index such as the S&P 500, the Dow Jones, or the NASDAQ 100. The value of an index fund will move up and down with the index. For example, if you own a S&P 500 index fund and the S&P 500 goes up, your index mutual fund will increase in value. Conversely, if the index goes down, the value of your mutual fund shares go down.
Equity mutual money can also be broken in to investment aim. The one most common classifications are growth money and value money. Growth mutual money look to invest in companies that have shown consistent growth and are likely to continue to produce steady growth. Value mutual money try to find bargain stocks or companies that are currently out of favor with investors but are sound fundamentally and undervalued.
Yet another classification of mutual money is based on stock size such as small cap, mid-cap, or giant cap. While the exact classifications can differ, a small cap stock generally has less than 1 billion in market cap (the stock price x the number of shares outstanding) and a giant cap stock has over 5 billion in market cap. A mid-cap stock is somewhere in between. Most giant cap companies are widely known companies such as GE, Exxon, or Microsoft. Small cap companies offer higher returns but they are also more hazardous.
Finally, mutual money can be domestic, foreign, or international. An international fund is generally a combination of U.S. companies and foreign companies. Foreign mutual money can be further classified in to regions (Latin America, Asia) or country. While this is not a complete list of mutual fund types it should help explain lots of of the types and choices available to the mutual fund investor.
Atom Feed (xml)
No comments:
Post a Comment