There is a slew of various stock mutual funds - here are the most common categories and sub-categories.
When searching for stock mutual funds, you're going to run into all sorts of names and categories. They are usually pretty broad and sometimes misleading, but at least they give you an idea of what you are getting yourself into.
Here are some of the most common categories and sub-categories.
Value funds
Value fund managers look for stocks that they think are cheap on the basis of earnings power (which means they often have low price/earnings ratios) or the value of their underlying assets (which means they often have relatively low price/book ratios).
Large-cap value managers typically look for big battered behemoths whose shares are selling at discounted prices. Often these managers have to hang on for a long time before their picks pan out.
Small-cap value managers typically bottom fish for small companies (usually ones with market value of less than $1 billion) that have been shunned or beaten down by other investors.
Growth funds
There are many different breeds of growth funds. Some growth fund managers are content to buy shares in companies with mildly above-average revenue and earnings growth, while others, shooting for monster returns, try to catch the fastest growers before they crash.
Aggressive growth fund managers are like drag racers who keep the pedal to the metal while taking on some sizeable risk. These types of funds often lead the pack over long periods of time - as well as over short periods when the stock market is booming - but they also have some crack-ups along the way.
Growth funds also invest in shares of rapidly growing companies, but lean more toward large established names. Plus, growth managers are often willing to play it safe with cash.
As a result, growth funds won't zoom as high in bull markets as their aggressive cousins, but they hold up a bit better when the market heads south.
Consider them if you're seeking high long-term returns and can tolerate the normal ups and downs of the stock market. For most long-term investors, a growth fund should be the core holding around which the rest of their portfolio is built.
Growth-and-income, equity-income, and balanced funds
These three types of funds have a common goal: Providing steady long-term growth while simultaneously throwing off reliable income. They all hold some combination of dividend-paying stocks and income-producing securities, such as bonds or convertible securities (bonds or special types of stocks that pay interest but can also be converted into the company's regular shares).
Growth-and-income funds concentrate more than the other two on growth, so they generally have the lowest yields. Balanced funds strive to keep anywhere from 50 to 60% of their holdings in stocks and the rest in interest-paying securities such as bonds and convertibles, giving them the highest yields. In the middle is the equity-income class.
All three types tend to hold up better than growth funds when the market turns sour, but lag in a raging bull market.
All of these are for risk-averse investors and anyone seeking current income without forgoing the potential for capital growth.
Specialty and other types of funds
Rather than diversifying their holdings, sector and specialty funds concentrate their assets in a particular sector, such as technology or health care. There's nothing wrong with that approach, as long as you remember that one year's top sector could crash the following year.
They are most appropriate for investors who are interested in a particular theme - say, biotech - but want to defray some of the risk of choosing individual stocks within the sector.
Welcome to the Beginner's Guide to Trading Futures. This guide will provide a general overview of the futures market as well as descriptions of some of the instruments and techniques common to the market. As we will see, there are futures contracts that cover many different classes of investments (i.e., stock index, gold, orange juice) and it is impossible to go into great detail on each of these. It is, therefore, suggested that if after reading this guide you decide to begin trading futures, you then spend some time studying the specific market in which you interested in trading. As with any endeavor, the more effort you put into preparation, the greater your odds for success will be once you actually begin.
Important Note: While futures can be used to effectively hedge other investment positions, they can also be used for speculation. Doing so carries the potential for large rewards due to leverage (which will be discussed in greater detail later) but also carries commensurately outsized risks. Before beginning to trade futures, you should not only prepare as much as possible, but also make absolutely certain that you are able and willing to accept any financial losses you might incur.
The basic structure of this guide is as follows: we will begin with a general overview of the futures market, including a discussion of how futures work, how they differ from other financial instruments, and understanding the benefits and drawbacks of leverage. In Section Two, we will move on to look at some considerations prior to trading, such as what brokerage firm you might use, the different types of futures contracts available and the different kinds of trades you might employ. Section Three will then focus on evaluating futures, including fundamental and technical analysis techniques as well as software packages that might be useful. Finally, Section Four of this guide will provide an example of a futures trade, by taking a step-by-step look at instrument selection, market analysis and trade execution. By the end of this guide, you should have a basic understanding of what is involved in trading futures, and a good foundation from which to begin further study if you have decided that futures trading is for you.
The decision to buy something is relatively easy.
What, specifically, to buy is an altogether different problem. Before you drive your new car home, you have to choose a certain make, a certain model, certain upholstery, a certain color scheme.
You decide between six cylinders and eight, between regular shift and automatic transmission, and say yes or no to white walls, radio, heater, and a dozen other optional extras.
So with securities. Although there are only two major categories-bonds and stocks-to select from, the variations and refinements and optional extras are as numerous as they are confusing.
For many investors, one factor may be sufficient reason to determine a choice. The man of modest means will very likely find corporate bonds at $1,000 apiece too steep and their 3 per cent interest payment too small for what he is trying to achieve.
A wealthier investor might be fascinated by the potential in common stock but find that he would obtain a greater yield from tax-exempt municipals. All investors, however, will do well to become familiar with the various kinds of securities represented in corporate capital structures in order to understand their effect on each other and their bearing on the choice he eventually makes for himself.
The corporation is an entity marvelously adapted to the requirements of all parties involved. It developed in response to the needs of the business community for funds over and beyond its own resources to enable it to build, expand, and grow.
The basic, one-celled form of business life is the individual entrepreneur-the store owner who merchandises goods, the artisan supplying services, the small manufacturer-whose capital needs are met out of savings or through a modest bank loan.
Somewhat more complex is the partnership, the pooling of the resources of several individuals to share in a joint venture. Presumably the credit of the group is somewhat stronger than that of the individual. The partners also assume responsibility for management of their company, participate in all profits accruing, and are legally liable for all debts outstanding.
As long as firms remain relatively small, either type of organization is adequate. As opportunities for expansion present themselves, however, when new plant and equipment are required, when greater amounts of raw materials must be stockpiled, and branch offices and distributors underwritten, and personnel increased, the individual and the partners are hard pressed. Their surplus generally is too small, their normal lines of credit too limited to do the job.
Enlargement of the partnership is no answer. Outside investors willing to take on the mutual responsibilities of partnership, or to immobilize their funds in a partnership agreement, are hard to come by. In any event, the range of financial needs at this stage usually is so great that only by increasing the partnership to ridiculous proportions could they be met.
The solution? A public stock corporation. Ownership thereby is spread among as many hundreds or thousands of people as are willing to buy in, their proportional part of the firm being represented by the amount of stock or number of shares they hold. Their reward is likewise a proportional share of their firm's profits.
Their control is exercised through the board of directors they elect. And because their stock is a standardized, known quantity-and because there are stock exchanges they can readily withdraw from the company and sell their piece of ownership to someone else.
The corporation, once established and in being, is an impersonal thing of indeterminate duration. Directors and officers may come and go, investors may buy in and sell out, but the corporation has a momentum and life force which may enable it to run on indefinitely.
With the Forex picking one currency against another is also similar, but you have the benefit of using Forex software to help you nowadays which can sometimes be downloaded free.
