Stocks

Stocks, also referred to as equities, are securities that represent ownership in a company. More specifically, stock ownership is represented by shares, which you buy in order to participate in the growth of a particular company. When you own individual shares of stock, your money grows when the company grows or prospers, in two ways:

1. Dividends, which are the portion of the company’s profits that are paid out to stock shareholders; and
2. Capital appreciation, which is an increase in the value or price of shares, which means you could sell them for a profit, or capital gain.

There are two main kinds of stocks, common and preferred. A company’s preferred stock offers a guaranteed, fixed dividend amount, and these dividends are paid before common stock dividends are paid. However, common stock can offer increased dividends when the company prospers, rather than the same fixed dividends. Preferred stockholders are in a better position to get their investment back if the company falters, but they also have less opportunity for growth when the company prospers.

As you might guess, you don’t just share in the success of a company when you own its stock – you also share in its setbacks. For this reason, stocks are broadly considered to be the most volatile asset class, meaning that stocks tend to experience more fluctuation in value than other types of investments.

But remember that risk and reward go hand in hand. Stocks have also historically outperformed all other asset classes.

For these reasons, most investment professionals feel that stocks are a strong investment option for long-term investing, but not for short-term investing. Typically, stocks are only recommended for investors whose financial objectives are at least 5 to 10 years into the future.

When companies and governments need to raise money, they issue bonds. When investors buy these bonds, what they’re really doing is loaning that company or government money for a set period of time. In return, the issuer promises a specified interest payment and prompt repayment of the loan.

Bonds are also called fixed income securities, because they produce a fixed amount of income on a regular basis.

There are many different types of bonds, each with its own risk level and reward potential. Bonds are generally categorized by issuer: corporate bonds, municipal bonds, government bonds, etc. (For descriptions of these kinds of bonds, see the glossary of terms.)

Municipal bonds (sometimes called "munis" for short) are issued by municipalities, which use the money for projects like roads, hospitals, schools, etc. Because these projects promote important civic development, the government can exempt municipal bond interest from taxation.

As a result, many investors choose municipal bond mutual funds to earn interest that’s federally tax-free. Some municipal funds only invest in the bonds of a particular state, and the interest from these funds is generally free from both federal and state income taxes for residents of that state*.

The interest payment and the face value (the dollar amount of the bond when issued, which is also the amount to be repaid by the issuer at maturity) of a bond don’t change. But the value of a bond relative to the market can change.

That’s because interest rates affect bond prices. When interest rates rise, bond prices fall, and vice versa. So if interest rates go up, new bonds being issued will pay a better interest or "coupon" rate than the ones you may hold. Since the value of bonds can rise or fall, so too will the value of bond mutual funds that invest in them. As a result, bond funds represent moderate risk.

Money market securities are very short-term debt securities. Because they are so short-term, they offer reduced exposure to risk and are the most stable of all the major asset classes. Conversely, though, they offer limited capital appreciation potential. In fact, money market mutual funds are managed to keep a stable $1.00 share price, so that you can get back every dollar you put in. Although there is no guarantee that any money market fund will maintain a stable share price, very few money market funds have ever failed to do so.

Money markets are thus primarily bought for income, stability of principal and liquidity. Some money market mutual funds even offer the added benefit of checkwriting from an account.

Growth of $1 Over Time
Historical performance of the major asset classes

Past performance is no guarantee of future results. For illustrative purposes only and does not represent the performance of any Huntington Funds portfolio. It is not possible to invest directly in an index. Source: Thompson Financial Company For more complete information about Huntington Funds, view the prospectus available on this website or call 1-800-253-0412 for prospectuses. You should consider the funds’ investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the funds’ prospectus, which you should read carefully before investing. Mutual funds are subject to risk and fluctuate in value. In return for their higher growth potential, stock prices are more volatile than those of bonds or Treasury bills. Unlike stocks and corporate bonds, government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest if held to maturity. Large Company Stocks are represented by the S&P 500 Index: An unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Long-term Government Bonds are represented by the Lehman Brothers Government (Long-Term) Index: An index composed of bonds issued by the U.S. government or its agencies which have at least $1 million outstanding in principal and which have maturities of ten years or longer. Index figures are total return figures calculated monthly. Corporate Bonds are represented by the Lehman Brothers Credit Bond Index: Composed of all publicly issued, fixed-rate, nonconvertible, investment-grade corporate debt. Issues are rated at least Baa by Moody’s Investors Service or BBB by Standard & Poor’s, if unrated by Moody’s. Collateralized Mortgage Obligations (CMOs) are not included. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Inflation is represented by Consumer Price Index (CPI). The CPI is an index representing the rate of inflation of U.S. consumer prices as determined by the U.S. Bureau of Labor Statistics. Edgewood Services, Inc., is the distributor of the funds, and is not affiliated with The Huntington National Bank. Huntington Asset Advisors, Inc. is the Investment Advisor of Huntington Funds. Not A Deposit • Not FDIC Insured • Not Insured By Any Government Agency • No Bank Guarantee • May Lose Value

* Income may be subject to the federal alternative minimum tax and state and local taxes.

** An investment in money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

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