Retirement mutual funds, also sometimes called target-date mutual funds, were designed to provide a given amount of income at some specific future date. Often, they are structured to provide immediate diversification into stocks and bonds, in order to build rapid portfolio value. Later, as the member nears retirement age, they move into a more conservative investment blend.

Recent market turmoil and aggressive legislation have made retirement mutual funds more costly, particularly since the first quarter of 2009. Fund management fees have increased sharply, in compensation for decreased participation. Still, these funds are popular amongst middle-income investors with ten to twenty remaining years before they reach retirement age.

When these investment vehicles first became popular, many company managed retirement funds chose them, for their outstanding performance and relative flexibility. However, in the last couple of years, more and more companies are moving away from them, in favor of more conservative, self-managed funds.

Typically, retirement mutual funds will invest in equity investments, as long as the projected retirement age is ten years or more away. They will usually maintain around 2/3 domestic equity, and 1/3 foreign, as the fund creates capital gains. Most often, they’ll also carry a mix of investment in bonds, which will provide income with less fluctuation in price. As interest rates increase, the funds will sometimes convert more of their investment into cash, which will pay lower rates, but will be more stable than bonds.

As retirement age nears, the fund usually begins to be managed more conservatively, moving from equity into bonds and cash. This provides the stability necessary to maintain the necessary cash flow for the retiree.

Unless one is very familiar with investment markets, it is advisable that a fund manager is utilized; at least until a minimum comfort level is reached. The retirement mutual fund can be the difference between comfort and poverty in one’s retirement, but proper fund management is critical, and should not be undertaken by amateurs.

Equity mutual funds are professionally managed mutual funds that invest in stocks, with the objective of long term growth through capital gains, rather than strictly dividends (although dividends have historically been responsible for a good share of the long-term return). Typically, mutual funds specializing in equities focus either on a group of stocks in a particular risk group, or in a particular business sector. They are usually further specified as a large-cap, mid-cap or small-cap portfolio.

The demarcation between large, mid and small-cap varies somewhat from one fund manager to another, but they are roughly considered to be companies capitalized at greater than $5 billion, down to less than $500 million, with mid-cap filling the range in between. When it comes to picking the stocks for their portfolio, equity fund managers may use a value approach, a growth approach or a blend of the two.

• In the value approach, they look for companies that are undervalued on the market for their actual worth. These stocks often will increase in value when purchased in sufficient quantity, simply because of the implication of optimism from the actual purchasing.

• In the growth approach, the fund manager will look for stocks of companies that are growing faster than their competitors, or than the market itself. Rapidly growing, established companies are prime targets.

• Some managers prefer to blend their approach, seeking stocks with both value and growth profiles, thus affording a little more protection to their portfolio.

Equity mutual funds are investments that are typically held for prolonged periods, unless a downswing is detected. They offer no particular tax exemption when profitable, but if carefully selected, they can render sizeable returns. As with nearly all investment opportunities, risk and return are in inverse proportions. That is to say that low-risk funds will offer a lower potential return than a high risk fund. Unless one is well versed in stock trading, and has the time to monitor the market very aggressively, it is nearly always advisable to use a professional fund manager.

While there is currently no mutual fund actually referred to a “dividend mutual fund”, the term refers to a professionally managed mutual fund that pays dividends to its shareholders. These are funds comprised of a selection of different companies’ stocks, typically companies that are well established so you should have no problem finding their stock market quotes at any of the major financial sites like TheStreet.com. As such, their growth may be relatively low or non-existent, so capital gains are essentially zero. As a result, the return on investment is not as high as with some other types of mutual funds, but the risk of loss is lower, making them a good choice for retirement funds. However, there are few tax advantages in a mutual fund focused on corporate stocks.

Dividends are payments made to the shareholders, out of the percentage of the corporation’s profits which has been set aside for dividend distribution. Dividend-focused mutual funds select shares of solid companies, and will usually diversify by owning shares in several corporations, some of which may even be competitors. Should the profits of one company decline, decreasing the dividends from that stock, the loss is usually covered by the dividends paid by the other stocks in the mutual’s portfolio. The goal in selecting the companies for the mutual’s portfolio is not to find companies that are growing, and will yield a high capital gain, but to invest in companies that are financially stable, with a significant share of an established market, to ensure ongoing profits, hence dividends.

So-called dividend mutual funds can be a good low-risk investment vehicle, provided they are properly selected and that the mutual fund manager monitors them closely for any fluctuations. Minor ups and downs in one company or another are normal, but mutual funds must avoid these, or lose their preferred status.

Many factors enter into the selection of the companies in a good dividend mutual fund, such as company age, market share, profitability, flexibility and other factors. The mutual fund itself should be selected by carefully investigating the past performance and risk profile. Typically, a single quarter’s performance between two prominent mutual funds may differ by only one eighth of a percent or less, so selecting the best long-term performer can make a great deal of difference in the outcome of your investment.

Commodity mutual funds are professionally managed investment funds, specializing in commodities, or materials, which are used in other products. Wheat, sugar, soybean, coffee, gold, oranges, livestock, etc. are all commodities. The most attractive feature of the commodity mutual fund is that their prices tend to offer a very nice hedge against inflation, since their prices tend to rise in lockstep with it. Another benefit is that their investment returns aren’t tightly bound to equities or bonds. These two reasons make commodity mutual funds an important part of a well-rounded investment portfolio.

There is another option available for commodity mutual funds, which is called an ETF, or Exchange Traded Fund. ETFs can be purchased on the market, bypassing a fund manager. Most are passively managed (meaning they are tied to an index, which keeps the cost lower), and some carry tax benefits not afforded to regular mutual funds.

Hedge funds are probably the most widely known commodity mutual funds. However, one million dollars net worth is the standard qualification mark for hedge fund investments, which puts it out of the reach of many investors.

Commodities trading is unlikely to become depressed in the near future, for three major reasons. First, rapid development in China and India will drive the commodities market to new highs for some time, as materials will be in high demand during that growth. Second, diminishing food supply for a rapidly expanding world population ensures a healthy market in food commodities for some time to come. Finally, “peak oil” theory has brought greatly increased interest in new energy endeavors.

Self-made billionaires like Jim Rogers and George Soros have brought an awareness and popularity to the commodities trading market that is still growing each day. More available than hedge funds, commodity mutual funds may be the best option for many people, as they are open to all, and have an active management, with the ability to exploit market trends.

What are Bond Mutual Funds? Types of Bond Funds

Bond funds are one of the more conservative professionally managed mutual funds around, in that they protect the invested principal and are invested in more stable debt vehicles, such as US government bonds, municipal bonds or corporate bonds. The mutual members receive a monthly or quarterly dividend, comprised of the interest paid on the investment, plus any capital appreciation of the shares. Hence, there is a regular income derived, often with the added benefit of being tax exempt.

US Government Bond Funds – these funds invest in debt securities issued by the US government. They include Treasury bills, Treasury notes, Treasury bonds, and also mortgage-backed securities, such as those issued by Fannie Mae and Freddie Mac. These are often exempt from state and local taxes, but not federal taxes. The greatest risks faced with these bonds are fluctuating interest rates and inflation.

Municipal Bond Funds – These funds invest in debt securities issued by state and local governments, to pay for specific projects, such as schools, highways and bridges. They are exempt from federal taxes, and in some venues, state taxes, making them popular investment vehicles. Since municipalities have been known to declare bankruptcy, however, these bonds are more risky than US bonds.

Corporate Bond Funds – These are the least secure of the bonds group, as they are not backed by any government entity. To offset this higher risk, they usually pay a considerably higher yield than either US or municipal bonds. Should the corporation find itself in financial trouble, however, these higher risk bonds can be rendered worthless.

There are several other types of bond funds, such as those that specialize in investing in zero-coupon bonds, international bonds, and convertible security bonds. There are also multisector bond funds that will spread their investments across several different types of bonds. Multisector bond funds are often selected for the higher risk portion of an investment portfolio, as the diversification protects the shareholder against downward spirals in one industry.

Investors usually choose mutual bond funds for two major reasons: regular income, and diversification. In some instances, as mentioned, tax exemptions make them even more attractive.

© What are Bond Mutual Funds? Types of Bond Funds

Stock Mutual Funds

Stock mutual funds are mutual funds that primarily invest in stocks (hence the name). As we know, mutual funds invest in a variety of securities which are then combined and divided in to shares for investors according to how much they invested in the fund. Let’s take a closer look at stock mutual funds shall we?

Common stock mutual funds (also known as equity funds) have benefits and drawbacks for investors. First it should be known that funds that invest primarily or exclusively in stock are in a higher risk class than their money market fund or bond fund counterparts, so if risk isn’t your thing then you should look elsewhere. The upside to stock funds is that you get the benefits of buying stocks, which have outperformed almost every other investment over time, but you get the added diversification of buying many stocks which the everyday investor simply can’t afford to do.

There are a bunch of different types of stock mutual funds that you can buy, so you should be able to find a stock fund that matches your risk type and investment goals.

For those of you looking to be a little riskier with your investment income in exchange for a good return you could look in to growth stock mutual funds. Growth stock funds invest primarily in funds that have high growth upside, allowing the investors to benefit from the capital gains (appreciation in the stock’s value). There are varying levels of growth funds from lower risk growth funds to aggressive growth funds so be sure to understand which you are investing in before you hand over your cash.

You also have the option to invest in sector funds which are stock funds that focus primarily on a single sector of the market such as tech, energy or health care. As we learned during the dot com era, you can make a great deal of money by focusing on a single sector of the market, but you can also lose a great deal of money by focusing on a single sector as well (see the dot com bubble collapse of the early 00’s). If you were to invest in this type of fund it would make sense to invest in a few of them to diversify your holdings.

You can also invest in a more specific type of sector funds such as gold stock mutual funds which consist of precious metals sector stocks, but only those that focus on gold investing. Additionally you can invest in an entire index with stock index mutual funds, for those who want to spread the risk even more.

You can also invest in stock mutual funds that focus on a particular size of stock, these are known as cap funds. Market cap (short market capitalization) is a gauge of the total worth of a company and is calculated simply by the value of the common stock times the number of shares outstanding. Typically the larger the market cap the more stable the company, so large cap mutual funds tend to hold less risk than small cap or micro cap funds.

Stock market mutual funds have a lot of advantages and disadvantages so be sure you do your homework before you buy. As always consult with your financial advisor to be sure that stock funds are appropriate for your investment portfolio and ask for help determining which stock funds are right for you.

© Stock Mutual Funds

Money market mutual funds are very conservative funds that invest exclusively, or primarily, in money markets. These guys are good at naming their funds right? If you aren’t familiar with money markets, they are essentially short term, very low risk investments that offer a great deal of security but don’t offer much in the way of return. They are ideal for investors who are looking for a small rate of return but only have a short period of time to invest and aren’t willing to take a large amount of risks with their investment.

With the best money market mutual funds the obvious advantage to money market funds is that they are relatively low risk investments but conversely they aren’t extremely profitable funds. I should point out that just because money market funds are lower risk than other mutual funds, they can and sometimes do lose money. That said if you are looking for a safe way to invest in mutual funds you should definitely look toward the money market funds. You may even be able to find tax free money market mutual funds depending on what company you invest with.

With the securities that make up the fund being of the short term variety, the composition of money market funds changes very rapidly. With treasury bills and other securities maturing in a year or less, fund managers are forced to make a lot of movement in the fund to keep up. Because of this you should pay extra attention to the fund makeup as time goes on and money market mutual fund rates change, because the fund you bought in to initially may have a different makeup one or two years down the line.

One of the disadvantages of money market funds is that they are not FDIC insured like certificates of deposit (CD’s) and offer a very similar rate of return. To compensate your issuing company probably boasts a higher rate of return (albeit a small one) that will lure investors in.

As with all other sorts of mutual funds you should also make sure that you be sure that the fees and expenses that your mutual fund company charges you don’t outweigh the rate of return for your mutual funds, otherwise you should just keep your money in the bank.

Investing in Stock Funds: Equity Mutual Funds

Most beginners to mutual fund investing have heard of the term equity mutual funds but aren’t quite sure what it means. Simply put, equity mutual funds are mutual funds that invest principally in stocks. Despite not knowing what equity funds are, most people who own mutual funds probably have an equity fund in their portfolio.

There are a number of equity mutual fund options that you can buy, depending on the level of risk you are willing to take on. Growth stock mutual funds for example consist largely of stocks for that have the potential to grow very rapidly and provide investors with large capital gains, while on the other hand more risk averse investors may opt for a dividend fund that consists of stocks for low risk companies that pay a regular dividend but don’t appreciate much in terms of stock price.

Equity mutual funds can be broad investments that span an entire range of stocks, such as the S&P 500 or the Russell 2000. These funds are known as index funds, and the major advantage of index funds is that you are basically instantly diversified. Barring a crash of the entire market (which seems a bit more realistic these days), your money is relatively safe.

You also have the option to invest in actively managed equity funds that are managed by a fund manager that invests on behalf of the mutual fund owners on what combination of stocks they feel will provide the best rate of return for their investors. Typically portfolio managers have a great deal of investing experience that they can rely on to provide better returns, but they also have very advanced systems that help them to better time the market.

Other equity funds may be more specifically tuned to a particular group of stocks such as green mutual funds. On the other hand equity funds can have a particular diversification strategy that spans a broad range of stocks, perhaps a mix of growth stocks and dividend stocks to give investors a mix of capital gains and stable returns.

Equity funds are a great way for investors, especially beginning investors, to get most of the benefit of investing in the stock market, but without the risk that usually accompanies it. Equity funds can provide a nice level of diversification, or if you’re so inclined can provide you with the increased risk and reward that you’re looking for. The best part is that there are so many forms of equity mutual funds that there is sure to be one that is perfect for you and for your portfolio.

Investing in Stock Funds: Equity Mutual Funds

Just the thought of what mutual funds to invest in is enough to give anyone a headache. With so many investment choices available choosing the best mutual funds is difficult at best. If you don’t know all you should about each investment then you probably depend on reading articles and newspapers. If you have no idea of where to invest your money you’re best is to put it into growth stock mutual funds. Mutual funds are a great choice if you’re a beginner investor, however you need to decide whether you need a short term or long term investment and what risk level you are willing to take on in exchange for a higher return.

If short term investments are more your preference then growth stocks and growth stock funds are not your best choice. It would be better for you to invest in certificates of deposit. The essence of making any type of investment is to gain a profitable return regarding capital appreciation. You can achieve this by making an investment in growth mutual funds. Always think about the growth and the risk. With growth stock funds you are can achieve big returns however you take risks as well. So what do you look for in growth stocks? The first and most important thing you should determine is the future financial outlook of the company. In other words you need to determine whether or not the company is likely to grow in the future or simply maintain its current financial outlook.

To determine this take a look at the company’s price to earnings ratio and future price to earnings ratio. Price to earnings is simply a measure of a company’s stock price to its earnings. A future PE is a ratio of its current price to its future earnings projections. Any company that has higher price earnings ration are your best investment for growth stock funds. Growing companies always have increasing values in their stock prices. The sales and earning of a company is your best indicator of their growth potential. Growth stock mutual funds investors always look at companies that are interesting to potential investors. They will pay higher prices for stocks as long as they can be assured of a higher return. You are not after dividends but the return you will be receiving for a certain period of time.

If you intend to hold the growth stock mutual funds for a long period of time, say 10 or more years, then you will definitely receive higher earnings. It’s important to stay with your investments for long periods of time to reap the rewards as most stock and mutual fund investments increase dramatically over time. You need to have a high risk tolerance with growth stock funds than other types of mutual funds so be sure that you understand your risk level and are willing to take that chance. It can be difficult watching your mutual funds go up and down in the short term, but that is exactly what growth mutual funds tend to do, since they have a higher risk level than your standard mutual funds. Growth stock funds are known for their volatility and it is the responsibility of the fund manager to both avoid risk whenever possible, but achieve maximum growth of the funds.

Growth Stock Mutual Funds

The Best Green Mutual Funds

There’s a wide variety of “green” companies with most of them being smaller companies that offer green mutual funds, stocks and bonds to the public. The goods and services of these companies all share one common goal and that is to preserve the Earth. These eco friendly companies include individuals who consults other companies on using eco friendly “green” products as well as manufacturers of natural and organic products such as clothing and food and renewable resources for energy.

The companies that manufacture renewable energy are the most popular green mutual funds since it appears that green technologies are going to be around for a very long time. Renewable energy stocks are basically inexpensive for the most part, especially compared with companies that produce fossil fuels.

Green mutual funds are not as popular with those who are looking for long term investments. However there are younger adults that are basically guaranteed to see green stocks make a profit in the future that are driving green funds in to the mainstream financial arenas.

Individuals should always be cautious when investing in companies that offer green funds. Eco friendly is often used by companies to gain attention with in reality that company does more harm than good to the environment. There are still eco friendly companies that are small and relatively unknown so you need to do some research before making an investment.

There are several green mutual funds and stock companies on the market which are perfect for those wanting green mutual funds. A perfect example is the Sierra Club Stock Fund that uses a very rigid criterion to ensure that companies that are in the stock fund are truly eco friendly. There are also several Australian stocks offering environmentally conscience investors way to feel guilt free when investing.

CleanTeq is a new company that was established in 1990. Their single objective is providing water management and air pollution control methods.

AnaeCo is now using “green” methods for waste management and has been recently showing a steady growth increase. The price of the stock is somewhat low and there is plenty of room for growth ad shows to be a good opportunity for investors that would like to have a diversified portfolio.

Another Australian stock to establish green funds is Green Invest Ltd which is a company that uses environmental solutions and empowers their investor as well as the public to use more “green” solutions.

When it all comes together, green mutual funds are a good investment both financially and for our planet. With the recent push by the new administration for greener technologies, there is no doubt that green funds have a bright future and are definitely something you should consider for your portfolio in the near future.

The Best Green Mutual Funds