| Mutual funds now number in the thousands and run the gamut from
conservative money market funds to ultra-aggressive stock funds. "Conservative"
investments are those that have relatively modest risk/reward potential,
with a lot of emphasis placed on preserving the value of your initial
investment and/or on generating regular income. (That said, you can
still lose money in a so-called "conservative" investment.)
"Aggressive" investments are those that take on a greater
degree of risk for potentially greater long-term capital appreciation.
A Spectrum of Choices
The following spectrum is designed to give you a general idea of
the risk/return potential of various types of mutual funds. The
funds are listed by their "objective," which helps to
indicate what area of the market they focus on and what strategies
their portfolio managers employ in pursuing their goal.
Low Risk/
Return
Potential
|
|
| Money Market
Funds |
|
Common Objective:
Preservation of capital*; some current
income
Typically
invest in:
Short-term government
securities
Short-term money market securities
Short-term tax-exempt municipal obligations
|
| Bond Funds |
|
Common Objective: Current
income; some capital appreciation
Typically
invest in:
U.S. government bonds
U.S. corporate bonds
Tax-free municipal bonds**
Foreign bonds (government and corporate)
|
| Stock Funds |
|
Common Objective:
Capital appreciation
Typically
invest in:
Dividend-paying stocks
Growth stocks
Emerging growth stocks
International stocks
Emerging markets stocks
|
|
|
| |
 |
|
High
Risk/
Return
Potential
 |
* An investment in money market funds is not insured or 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 money market funds.
** Income may be subject to the federal alternative minimum tax and state and local taxes.
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