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Before we go any further, let's quickly review
the basics of each type of investment.
What They Are |
How They Work |
How to Use Them |
Types of Mutual Funds |
| Stocks |
| Stocks represent shares of
ownership in corporations. |
Investment returns are based
on a company's dividends and
profits, as well as how investors
assess the company's potential
for future profits. |
Take advantage
of stocks' higher
return potential.
Use as a hedge to stay
ahead of inflation. |
Market Capitalization
Small
Medium
Large |
Style
International
Growth
Value
Blend |
| Bonds |
| Bonds are IOUs issued by
governments, government
agencies, and corporations. |
The prices of bonds and their
returns are directly affected
by interest rate changes.
Generally, the longer a bond's
maturity, the more sensitive
its price will be to interest
rate changes. Bond
prices also fluctuate based on the
financial strength of the issuer
(that is, credit quality). |
Use bonds to generate
income potential and
diversify your portfolio. |
Credit Quality
Below Investment
Grade
- Low
Investment Grade
- Medium
- High |
Maturity
Long Term
Intermediate
Short Term
Ultra Short Term |
| Cash |
| Cash includes very short-term
IOUs issued by a government,
corporation, bank, or other
financial institution. |
Cash is generally stable
through all market conditions. |
Use for emergency
cash needs. |
Money Market Mutual Funds
- Taxable
- Tax-free |
Know the basics
-
Market capitalization. The value of a corporation as
determined by total dollar value of its outstanding shares.
-
Style. The investing approach of a particular stock mutual
fund, such as growth or value.
-
Credit quality. With regard to bonds, refers to ratings
assigned by Standard & Poor's and Moody's to help
investors evaluate the strength of the issuer.
-
Maturity. The date when a bond is due and payable. The
bondholder's principal and final interest payment are
scheduled to be paid on this date.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.
 Next:
Establishing the right asset allocation mix makes all the difference.
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