Stock (Equity) Mutual Funds

Introduction

Stock (or “Equity”) funds are mutual funds whose assets consist of shares of stock (ownership) in other companies.  In other words, the mutual fund company gathers the funds from individual investors, pools these funds, then makes purchases of shares in many different publicly held corporations.  So, with a relatively small investment, an investor is getting indirectly the benefit of owning shares of stock in many different companies.  This diversification that mutual funds provide is one of the attractive features for many investors.  Many investors also prefer to leave the choice of what company’s shares should be purchased to a professional money manager.

Equity mutual funds are often categorized by the size of the companies they hold (the total value of their underlying stock) or by the style, or philosophy, of investing.  The following sections will give an introduction into these fund classifications.