Types of mutual funds

Question 1

growth funds

Answer 1

capital appreciation is the primary objective, portfolio of common stock

Question 2

conservative growth funds

Answer 2

capital appreciation is the primary objective, common stock in large- cap companies for lower risk.

Question 3

aggressive growth funds

Answer 3

capital appreciation with rapid growth, common stock in small-cap emerging growth companies. Ex. technology, younger investors with risk tolerance, high risk

Question 4

value funds

Answer 4

capital appreciation, common stock in established large-cap companies with undervalued stock due to market inefficiency and long-increasing dividend payment history.

Question 5

blended funds

Answer 5

capital appreciation is primary with a mix of value and growth stocks

Question 6

equity income funds

Answer 6

dividend income primary, typically preferred stock, dividend paying large-cap companies, energy and utilities

Question 7

growth and income

Answer 7

hybrid fund that has two objectives capital appreciation and current income. invests in a mix of growth stock and income bearing securities such as bonds and/or preferred stock.

Question 8

corporate bond funds

Answer 8

higher risk than U.S. government and municipal bond funds, invests in corporate debt instruments

Question 9

high-grade bond fund

Answer 9

investment grade, lower risk, lower yield

Question 10

high- yield bond fund

Answer 10

speculative (junk bonds) higher risk

Question 11

U.S. treasury funds

Answer 11

Safety and preservation of capital: invests in T-bills, T-notes, T-bonds, virtually default free (the mutual fund shares are not guaranteed by government), interest rate risk

Question 12

GNMA bond fund

Answer 12

safety and income are key, invests in mortgage-backed securities backed by the federal government.

Question 13

Risks of a GNMA bond fund

Answer 13

interest rate, extension and prepayment risk

Question 14

municipal bond fund

Answer 14

tax-free income at a federal level (and possible state and local) invests in portfolio of municipal bonds, recommended for investors in higher tax bracket.

Question 15

balanced funds

Answer 15

provides moderate growth and income through a portfolio of stocks and bonds, moderate risk

Question 16

money market funds

Answer 16

safety and high liquidity, invests in short term debt instruments, check writing privileges

Question 17

asset allocation funds

Answer 17

type of hybrid fund where the objective is to protect against significant losses by dividing the portfolio among stocks, bonds and cash rebalancing to maintain those percentages.

Question 18

funds that are designed to become more conservative the closer they get to a target date

Answer 18

asset allocation funds

Question 19

index funds

Answer 19

mirrors the performance of the market by investing in stocks of a specific index (such as S&P 500) lower management fees, passively managed

Question 20

precious metal funds

Answer 20

invests in mining companies that produce gold, silver, or platinum, but they can also invest directly in commodities

Question 21

May provide a hedge against inflation

Answer 21

precious metal funds

Question 22

sector funds

Answer 22

considered aggressive growth investment, investments are concentrated in a particular industry or geographic region.