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An Overview Of The Examples Of Mutual Funds

March 05, 2012 | Comments: 0 | Views: 107

Examples Of Mutual Funds

There are many different examples of mutual funds. When investors pool their money together into a single investment, it is called a mutual fund. The different kinds of investments are separated by their asset classes. They can stick to just one asset class, like stocks or bonds, or invest in a blend of classes. The following is a breakdown of the different examples of mutual funds, from balanced, growth, and income funds, all the way to fund of funds and index funds.

Balanced And Lifestyle Funds

Balanced funds are sometimes called asset allocation investments. They invest in bonds as well as stocks, on top of the occasional other type of asset. The goal of the investment is to reduce the effects of market fluctuations in value by investing in a wide variety of assets that have little to do with one another. Lifestyle funds are similar in that they both invest in bonds and stocks. The difference is that over time, these assets will adjust and become more conservative to suit the investor as they get closer to retirement.

Growth And Aggressive Growth Funds

Growth, as well as aggressive growth funds, are for the more seasoned investors. The goal of growth funds is capitalization, or raising the price of individual stock. Instead of paying dividends to investors, the companies involved in these kind of investments put their money toward expanding, researching, or continuing development. Aggressive growth investments are usually selected by investors who want maximum capital gains. They invest in companies still developing, but that have shown the potential to yield large gains. Due to how new the companies are however, there is much more risk involved.

Index And Fund Of Funds

A type of investment that invests in other mutual funds is known as a fund of funds. Whereas a normal investment would have shares in securities, this kind invests in several other investments. This kind of investment is even more diversified than normal. The only issue with this kind of investment is that different objectives can change the way the investment operates, and expenses from each of the funds involved can start to quickly pile up. With index funds, investors go after the securities that form a market index. Securities in this kind of investment don't often change, and trading costs are also smaller, so investors get to enjoy lower management costs compared to those involved in other funds.

Connor Swinney is the owner of the What Are Mutual Funds website. He created the website to be used as a resource for people who are looking for more information on Deciding On Mutual Funds or that would like to know how they can create a successful investment strategy.

Source: EzineArticles
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Examples Of Mutual Funds

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