Types Of Mutual Funds

Equity funds are mutual funds that are entirely invested in stocks. Mutual fund managers may choose to invest in large cap, mid cap, or small cap firms. The cap size refers to the size of the firm. Large cap firms are the older firms that have a lot of capital and have been around for a while. Small cap firms are much smaller and often very new firms that have a lot of chance for growth. Mid cap firms are somewhere in between.

Mutual fund managers may choose to invest on only value stock. They do this by looking for stocks that are priced lower than they believe they are worth. For example, if Stock A is priced at $34 but they believe it would be priced at $40, they will purchase it because they believe it will go up to $40 in the near and they would get a profit of $6.


Growth funds are usually made up of mostly small cap stocks. Small cap stocks are new companies that should have a lot of potential growth, hence the name growth stock. Investing in growth stocks will ideally give you a high return because as the stock grows and grows, more people will want to invest in it raising the price. The higher the price goes, the more money you make if you own that stock.

If you are interest in investing in foreign stocks and you want to invest in a mutual fund, you should look into foreign stock funds. Investing in foreign companies can give you exceptional diversification. If investing in a foreign stock mutual fund, be sure to choose wisely for the best manager to ensure you get someone who knows foreign stocks and knows what they are doing. For this reason, you can invest in foreign stocks without having to worry that your knowledge on the subject is not up to par.

Not all mutual funds are invested in stocks. There are also many funds that invest solely in bonds. investing in stocks has a potentially high return, often higher than bonds, but by investing in bonds as well, you can greatly reduce the risk of your portfolio. Bonds are usually a safer investment, aside from low graded funds often called junk bonds. Government bonds are the safest investment, but don't return a very high amount, which is why a mixed mutual fund of all kids of bonds is best.

By: Samantha Asher

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