Stock (Equity) Mutual Funds

Investing Style

Value Funds

Value funds hold the stock of companies that are believed to be undervalued in price. Think of them as ‘bargains.’ They also tend to be stocks which have a high dividend yield, and may therefore supply income as well as capital gains. Large value funds are particularly suited to conservative investors.

Growth Funds

Growth funds hold the stock of companies whose earnings are expected to increase faster than the rest of the market. These stocks will typically not pay much in dividends; instead, earnings are plowed back into the company. The objective for investors is long-term capital gains.

Blend Funds

Blend funds hold both growth and value stocks. If you are just beginning to invest in stock funds, this may be a good place to start.

Index Funds

Index funds buy stocks to match certain market indices, like the S&P 500* (the 500 largest U.S. stocks) or the Wilshire 5000* (includes smaller stocks). They will very closely track the index they follow. (The only difference will be the costs of operating the fund which should be less than the costs associated with actively managed funds.) These funds are good choices for those who would rather trust the market than a fund manager. We'll discuss index funds in greater depth in Mutual Fund Management and Costs in the Liquidity Needs section of the Investing content.

* The S&P 500 index is an unmanaged index widely regarded as an indicator of domestic stock performance. The S&P 500 index can not be purchased directly by investors, and cannot depict or predict the performance of any investment.

*These indices cannot be purchased directly by investors, and cannot depict or predict the performance of any investment.  Indices are regarded as an indicator of stock or bond performance.

Equity-Income Funds

Equity-income funds focus on stocks with dividends that are larger than average. These will be from large, established companies, especially utilities. They may include large or midcap value or blend stocks.

Growth And Income Funds

Growth and income funds divide their energies more or less equally between income stocks that pay high dividends and growth stocks that are expected to appreciate. They may include large or midcap value, growth or blend stocks.

International Or Foreign Funds

International or foreign funds invest mostly in foreign securities. They carry an additional kind of risk because not only can the stocks go up or down, but the currency of the countries can also move in relation to the dollar.  In addition, there may be risk due to political, social, or economic developments within the countries.

Global Or World Funds

Global or world funds contain both foreign and U.S. securities.

Specialty Or Sector Funds

Specialty or sector funds concentrate in a particular area. There are funds concentrating on biotech stocks, on health care stocks, on gold stocks, on real estate, on utilities. Because they aren’t diversified, these funds carry higher risk.