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Stock Funds: Going for Growth
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Mutual fund stock funds invest in, you guessed it, stocks. And just as there are dozens of kinds of stock—foreign stocks, technology stocks, large-company stocks—there are dozens of types of stock funds.
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You can categorize stock funds a few different ways. Some funds, called domestic stock funds, only buy the stock of companies based in the US. Others, like international stock funds, only buy stock in foreign companies. Still others buy a mixture of both.
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You can also categorize stocks funds by the style assignments of the stocks it owns. One way to categorize them is by the size of the companies in which they invest—small, medium, or large. Funds that invest in young, pioneering companies tend to be riskier than funds that invest in big, well-known companies.
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Stock funds can also be classified as value, growth, or blend, depending on how relatively expensive the stocks they buy are. Value funds mainly buy bargain stocks, hoping they'll go up in value. On the other hand, growth funds invest mostly in stocks that are rapidly going up in value, even if those stocks are already expensive. Blend funds buy a little of both.
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While most funds invest in many different types of companies, specialty funds focus on one particular industry, such as financial services or telecom. These funds rise and fall with the industry in which they invest, so they can be quite risky.
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Stock funds are a great way to invest because they may be your best bet for long-term growth. They aren't guaranteed, however, and could even lose cash. They also tend to be relatively volatile; meaning the value of the fund can shift widely from month to month, or even day to day.
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