It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
* Bond Funds: Bond mutual funds are pooled amounts of money invested in bonds. Bonds are IOUs, or debt, issued by companies or governments. A purchaser of a bond is lending money to the issuer, and will usually collect some regular interest payments until the money is returned. Usually, the amount of interest paid (the coupon) is fixed at a set percentage of the amount invested, thus, bonds are called "fixed-income" investments.
* General Equity (Stock) Funds: Stocks represent part ownership, or equity, in corporations, and the goal of stock ownership is to see the value of the companies increase over time. Stocks are often categorized by their capitalization (or market cap), and like many other things come in three basic sizes: small, medium, and large. Many mutual funds invest primarily in one of these sizes and are thus classified as large-cap, mid-cap, or small-cap funds. Additionally, mutual funds are often categorized by the type of stock that is bought. Mutual fund types are generally "growth," "value," or a combination of the two, called "blend."
* Balanced Funds: Balanced funds mix some stocks and some bonds. A typical balanced fund might contain about 50-65% stocks, and hold the rest of the shareholder's money in bonds and cash. It is important to know the distribution of stocks to bonds in a specific balanced fund to understand the risks and rewards inherent in that fund.
* Global/International Funds: Global and international funds invest in companies whose homes are beyond the fair shores of this great nation. (There are, of course, many other great nations.) In general, international funds are much more volatile than domestic funds. International funds generally invest only in foreign companies, while global funds may invest in some U.S.-based companies in addition to foreign companies.
* Sector Funds: Sector funds invest in one particular sector of the economy: technology, banking, computers, the Internet, llamas. Just kidding about the llamas. No one has yet started the Llama Fund, though it's only a matter of time given that there is a mutual fund called the Couch Potato Fund, which invests in, as far as we know, the "remote control" sector. Sector funds can be extremely volatile because the broad market will find certain sectors very attractive and very unattractive often in rapid succession (much like couch potatoes may find certain programs very attractive and very unattractive in rapid succession -- annoying the heck out of their significant others).
* Index Funds: Finally, our favorite -- the index mutual fund owns a full participation in some portion of the stock market. An index fund matches the shareholdings of a target index, such as the Standard & Poor's 500 Composite Stock Price Index (S&P 500). Index funds are distinct from actively managed mutual funds in that they do not involve any stock picking by supposedly skilled professionals -- they simply seek to replicate the returns of the specific index. The Motley Fool Index Center offers a complete description of some of the major indexes you may have heard of.