Welcome to the latest series on JosephSangl.com – "Choosing Mutual Funds"
In this series, I will be sharing how I choose mutual funds. It should be noted that I do not sell investment products nor am I professional in the mutual fund industry. This is my own personal philosophy for choosing mutual funds.
Part One What is a mutual fund?
Part Two Establish investment goals
Part Three Types of mutual funds
There are literally THOUSANDS of mutual funds available in the marketplace today. Each mutual fund is usually assigned to a particular family of mutual funds.
Here are some common categories of mutual funds …
- International Stock Fund
- Aggressive Growth Stock Fund
- Growth Stock Fund
- Growth & Income Stock Fund
- Equity-Income Fund
- Balanced Fund
- Bond Fund
- Value Fund
- Industry-Specific Funds (like Healthcare Fund or Pharmaceutical Fund)
- Index Funds (S&P 500, Russell 2000, etc.)
If you purchase ownership in an International Stock Mutual Fund, you can bet that it is primarily investing in international companies. If it is an Aggressive Growth Stock Mutual Fund, you would expect to see the mutual fund purchasing shares of companies that are growing like crazy.
Each family of funds has a general "feel" to it. The International and Aggressive Growth Stock Mutual Funds tend to have wild swings in performance. One year it could grow 40% and the next it could lose 25%. It feels like you are on a great roller coaster ride at Six Flags!
Growth & Income, Equity-Income, and Balanced Funds are more stable and predictable.
Index Funds track specific market indexes like the S&P 500 and the Russell 2000.
In the next post, I will be sharing how to find mutual funds that meet your investment goals.