A Mutual Fund for Every Investor

Mutual funds come in all shapes and sizes. You can invest in stocks, bonds, both stocks and bonds, domestic, international, specific sectors, natural resources - just about anything you can think of.

Let us give you a brief Dolan primer covering the major mutual fund categories:

The most popular are equity funds. They are just what they sound like: Funds that invest in stocks, or equities as they are also called. Equity funds are categorized as follows:

• Large cap, investing in stocks with a market capitalization of more than $5 billion
• Mid cap, investing in stocks with market caps of $500 million - $5 billion
• Small cap, investing in stocks with market caps under $500 million

Additionally, each of these categories may be further divided into:

• Value funds, which include equities that are priced low, relative to their earnings potential
• Growth funds, which invest in companies with high growth, but whose stocks are more volatile and risky than value stocks and generally priced at a higher premium.
• Blended funds, a combination of both value and growth equities.

Sector funds concentrate on one particular sector of the economy. There are sector funds for just about any industry or subsector of any industry. Oil, energy, financial, pharmaceutical, semiconductors, hardware, software - you name it, there's probably a sector fund for it. While the concentration in one industry can bring fabulous rewards, it can also cause significant losses, making these funds more appropriate for investors who can handle more-than-average risk.

Bond funds, which invest in fixed-income securities, are also very popular, especially for investors who are more conservative with their money. These funds are available in short-term (1 - 3.5 years), long-term (>10 years) or intermediate-term (3.5 - 10 years). And bond funds come in a few varieties, as well:

• Government and government agency: The 'safest' (in terms of recouping your principal), but they generally pay the least amount of interest.
• Municipal: Bonds issued by state and local governments and their agencies, in the form of general or revenue issues. Investors should pay attention to their bond ratings before investing. Look for AA rated or better. For easy access to the major bond rating firms rankings, we've found the following web site helpful:http://www.investinginbonds.com.
• Corporate: Bonds issued by corporations tend to pay higher interest than governments or munis. The run the gamut from safe to risky; ratings should be checked. Buy only AA or better.
• High-yield: These pay higher returns, but they also tend to be much riskier than investing in regular corporate, government or municipal bonds. Investors should pay special heed to their ratings, but generally, we say avoid them!