MUTUAL FUNDS

Bond or income funds are made up primarily of bonds, so, what is a bond?

Basically, bonds are a way for a company (or government or agency) to borrow money. Bonds are issued with specific face values and interest rates (called “yield”). That’s why bonds are known as “fixed-income.” Bonds are generally also sold with a specific maturity date, meaning they have to be purchased back at a certain time at face value. This can make them stable, lower risk investments depending on the issuer.

As mentioned earlier, stocks and bonds do not behave the same way so having some money invested in bond or income funds – which can be lower risk – can be a good way to balance your risk and rewards. Just as in stock funds, there are many different kinds of bond funds. Some invest only in corporation-issued bonds, other concentrate on government bonds or agencies and some invest in a mix.

Certain bond or income funds can be good for investors who:

• Are looking for a stream of income
• Prefer less risk

Stock funds instantly give access to a wide range of different company stocks which most people could not afford on their own, with the added plus that the mix of stocks within a fund is managed by a professional.

Stocks are shares of ownership in a company, so if that company does well the stock will do well (increase in value). However, if that company does poorly, or even the industry it is in does poorly, that stock may lose value.

This means that stock funds offer the potential for higher rewards than bond or money market funds, but they also come with more risk as well. Depending on your tolerance for risk, stock funds can be ideal for individuals with long-term investment goals. That’s often why they are so popular for retirement funds and pensions.

There are many different kinds of stock funds catering to all styles of investors and objectives. This is good, because it means you can find the right ones for you.

Growth Funds

Stocks of companies considered to be fast growing.

Value Funds

Stocks of companies generally considered to be undervalued.

Large-Cap Funds

Very large “blue chip” company stocks that tend to pay dividends.

Balanced Funds

A combination of stocks and bonds in order to achieve some growth while attempting to manage risk.

International Funds

Mostly foreign-owned company stocks, or a combination of U.S. and foreign stocks. International securities are subject to political influences, currency fluctuations and economic cycles that are unrelated to those affecting the domestic financial markets and may experience wider price fluctuations.

Of course there are many other investments, along with funds that can provide a mix of different strategies. The important thing to remember is always choose with your goals in mind.

Stock or Equity Funds can be good for investors who:

• Generally have a longer-term timeline
• Do not mind some risk
• Want to increase diversification
• Like having lots of choices

Index Funds are called “passive” funds; the fund manager isn’t “actively managing” the stocks in the fund in an attempt to outperform what the market is doing, but simply trying to get as close to the index as possible.

What is interesting to many investors is that index funds generally do better than most other funds, and for that reason they have become very popular.

Index Funds can be good for investors who:

• Can tolerate some risk
• Prefer generally lower fees

When you want to keep a certain amount of cash on hand, whether for emergencies, purchases or simply while you decide how to invest it, money market funds make an ideal choice.

These funds generally invest in short-term, high-quality stable securities including U.S. Treasury bills and certificates of deposit, and are highly liquid meaning you can cash out quickly. Some money market funds allow you to write checks on them as well. They have by far the lowest risk of all styles of mutual fund, but the lowest potential reward as well.

Generally a money market fund offers returns higher than those of typical checking or savings accounts.

Money market funds can be good for investors who:

• Have almost no tolerance for risk and prefer stability
• Have a short-term investment objective
• Prefer to maintain liquidity (can cash out easily)
• Want to generate income

In general, money market funds are offered to meet the liquidity needs of clients, but unlike bank deposits, money market funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.

At a very basic level, an Exchange Traded Fund, or ETF, is an investment that tracks an index, a commodity, or a basket of investments like stocks or bonds.

ETFs that track an index or a commodity try to mirror the performance of that index (such as the S&P 500) or the price of that commodity. Because ETFs are marketable securities, they are sold in shares that trade like a stock.

If you own ETF shares, you are entitled to your portion of profits, such as earned interest and dividends paid.

• ETFs provide both diversification and flexibility; there are no minimum requirements, so you can purchase just one share.
• Expenses for most ETFs are lower than expenses for the average mutual fund. However, be aware of brokerage commissions that may be incurred when trading ETFs, as these will increase your investment costs.
• Because ETFs trade like stock, they can generally be bought and sold throughout the day at market price, providing greater liquidity. This differs from the pricing structure of mutual funds, whose value is calculated at the end of the day.

To evaluate the best investment options for you, please contact your advisor.

Exchange Traded Funds and mutual funds are sold by prospectus. For more complete information, please request a prospectus from your registered representative. Please read it and consider carefully a Fund's objectives, risks, charges and expenses before you invest or send money. The prospectus contains this and other information about the investment company.