Growth funds invest in stocks that the fund's portfolio manager believes have potential for significant price appreciation and for large capital gains. Many of these portfolios focus on companies in expanding industries.
Equity income funds invest in stocks that regularly pay dividends.
Small-cap, mid-cap, or large-cap stock funds select from companies within a certain size range. Economic cycles tend to favor different sized companies at different times, so, for example, a small-cap fund may be doing very well at a time when large-cap funds are more stagnant, and vice versa.
Taxable Bond funds are bonds issued by corporations or the U.S. government/agencies.
Municipal Bond funds are issued by various state and local governments. The income from these bonds is generally free from federal taxes and in certain cases from state and local taxes.
Balanced funds invest in a mixture of stocks and bonds to build a portfolio diversified across both asset classes. The target percentages for each type of investment are stated in the prospectus. Because stocks and bonds tend to do well during different phases of an economic cycle, balanced funds may be less volatile than pure stock or bond funds.
Target-date funds, sometimes called lifecycle funds, are funds of funds that change their investments over time to meet goals you plan to reach at a specific time, such as retirement. These portfolios provide diversified exposure to stocks, bonds and cash. Typically, target-date funds are sold by date, such as a 2025 fund. The farther away the date is, the greater the risks the fund usually takes at first. As the target date approaches, portfolio management adjusts the allocation. Note: The principal value of the target-date funds is not guaranteed at any time, including at the target date.
Money market funds invest in short-term debt, such as Treasury bills and the very short-term corporate debt known as commercial paper. These investments are considered cash equivalents. Money market funds invest with the goal of maintaining a share price of $1 while earning interest for shareholders with a goal of preserving capital. They are sometimes considered an alternative to a bank savings account although they aren't insured by the FDIC. Some funds have private insurance.