Growth? Income? Tax-exempt? The most important part of investing in a mutual fund1 just might be sorting through all the different fund types to find one with an investment strategy that matches your own goals. Browse through these brief descriptions of a few common fund types to see which ones match your objectives.
Growth funds buy stocks of small, medium-sized, or large companies with the potential for increasing in value.
Aggressive growth funds invest in higher risk companies that are positioned for sudden rapid growth. Stock prices may be volatile.
Growth and income funds generally hold stocks of established companies and look for modest growth and high dividend earnings.
International funds buy foreign — or a mix of foreign and domestic — securities. The risks of investing internationally include changes in currency rates, foreign taxation, differences in auditing and financial standards, and other risks.
Sector funds invest in companies in a specific industry, such as pharmaceuticals, technology, etc. They may be subject to greater volatility than funds that invest more broadly.
Value funds invest in stocks of companies whose stock prices are “undervalued” (lower than the stock seems to be worth) in the expectation that prices may rise in time.
Corporate bond funds2 usually buy bonds issued by different companies, with the goal of generating income.
Municipal bond funds2 buy bonds issued by one or more states or localities. Income is generally exempt from federal taxes. However, interest income from certain municipal securities must be included when calculating the alternative minimum tax.
High-yield funds invest in low-rated or unrated “junk bonds” that may produce high income but have a greater likelihood of default than bonds with higher ratings.
Income funds hold investments that generate current income. They may be stock or bond funds, or balanced funds that invest in both.
1You should consider the fund’s investment objectives, charges, expenses, and risks carefully before you invest. The fund’s prospectus, which can be obtained from your financial representative, contains this and other information about the fund. Read the prospectus carefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.
2Prices of fixed income securities may fluctuate due to interest rate changes. Investors may lose money if bonds are sold before maturity. You should consider the fund’s investment objectives, charges, expenses, and risks carefully before you invest. The fund’s prospectus, which can be obtained by calling your financial representative, contains this and other information about the funds. Read the prospectus carefully before you invest or send money.
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