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Guide For Top Mutual Funds By Category
| Mutual funds have certain advantages when compared to securities. In mutual funds you can have easier diversification, you have access to professional money management and above all you incur lower transaction costs. |
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The U.S. Securities and Exchange Commission mandates very mutual fund that sells its shares to public to publish a prospectus. This prospectus is nothing but the objective of the mutual fund where it is explained how the fund intends to achieve its results.
There are many different types of mutual funds to choose from and it is easier to discuss them as categories rather than individual mutual funds. Some of the top mutual funds by categories are listed below.
- Value stock fund is a type of mutual fund that invests in value stock. Value stock funds are supposed to be cheaper when compared to other stocks if we take valuation measures like price to earnings and price to book ratios.
- Then there is the Growth stock fund which invests in stocks of companies whose sales and profits are expected to grow or increase rapidly. In growth stock funds, dividends are usually not paid and an investor earns his investment with the increase in the share price of the stock. Growth stock funds are considered to be riskier than value stock funds.
- Income stock funds generate dividends which are ideally suited for conservative investors. This type of mutual fund is less risky than growth fund and value fund because it has the capacity to generate steady income.
- Foreign stock fund are stocks of those companies that are registered outside the U.S. Foreign stock investment has little or low correlation with U.S. stocks and you can reduce you investment risk through diversification.
- Market cap fund refers to investing in stocks of companies that have market capitalization which is within a particular range. Market capitalization is the share price of a company multiplied by the number of issued and outstanding shares. Market cap funds can be large cap, small cap or mid cap.
The above mentioned are some of the most common mutual fund categories. Besides these are other categories which you can invest in. They are sector funds, index funds and exchange-traded funds.
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