If you’re new to investing, chances are you’re going to come across some language and terminology that’s going to be new and confusing. One of the most common questions new investors ask is for definitions of the different types of investment funds that are available. While it would probably be impossible to cover every type of fund out there in one short article, here is a list of 12 of the most common funds you might encounter and what they are.
Mutual Fund
Probably the type of fund that most people are familiar with, mutual funds represent investments of a combination of stocks, bonds and securities that have been pooled together from many different investors. Mutual funds therefore offer the best choice for diversification and are professionally managed to track their performance.
Growth Fund
These funds represent investment in companies that are currently in a phase of expansion and thus have higher expectations of growth than the average stock.
Emerging Market Fund
This type of fund represents investments in less developed countries that are expected to see growth and improvement over time and therefore have good return potential.
Bond Fund
A bond fund is basically one segment of a mutual fund that invests in bonds.
No load Fund
Generally there are fees applied to purchase and sales of investments but a no load fund is an investment that has no sales fee applied.
International Fund
This term applies to investments that are made in companies of foreign countries that have an established and healthy economy.
Value Fund
When a stock is considered under priced based on the current market, it is often referred to as a value stock. Investment in this type of commodity is referred to as a value fund.
Blend Fund
A blend fund is the term used to describe an investment that includes a combination of value funds as mentioned above, and growth funds.
Index Fund
Stocks are generally listed in an index and an index fund is made up of a selection of stocks included in a particular index.
Balanced Fund
A balanced fund is one that includes a combination of both stocks and bonds. It is not necessarily an equal balance and can be weighted to more of either stocks or bonds. A balanced fund is generally accepted as a very conservative and reliable investment approach.
Lifestyle fund
A lifestyle fund is one that is specifically targeted to an individual’s investment goals. It is generally a mix of investments and isn’t intended to change over time.
Life Cycle Fund
Life cycle funds are designed to adjust to the needs and goals of the investor as the date for the funds maturity approaches. As an individual gets closer to retirement, for example, a life cycle fund switches to more conservative investments.
Money Market Fund
This type of fund is geared towards short term types of investments such as Treasury bills and CDs.
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