In short, stock funds (also sometimes called “funds”) are investment funds that invest only in shares. Therefore, they are considered riskier than most other types of funds such as bond funds or money market funds. Along with the increased risk, but come the potential for higher returns.
For long periods, stocks have historically outperformed bonds and cash investments, and when stocks are going well, the mutual funds naturally follow suit. But not all stock funds are the same – these can vary greatly according to its stated aims, management style and the types of companies they invest in.
Growth funds are stock funds that invest in stocks with the potential for capital appreciation in the long term. Focus on companies that are experiencing significant earnings or revenue growth, rather than companies that pay dividends. The hope is that these companies will continue to rise rapidly increasing its value, so the fund to reap the benefits of large capital gains. In general, growth funds are more volatile than other types of funds – in Bull markets tend to rise more than other funds, but in bear markets can fall much lower.
Value funds invest in companies that are believed to be bargains – ie invests in companies with low P / E ratios These shares, which have fallen foul of the leading investors for any reason, due to the changing preferences of investors, a poor quarterly earnings report or difficult times in a particular industry. Values values are often the stock of mature companies that have stopped growing and use their earnings to pay dividends. Thus, value funds produce current income (from dividends) and growth in the long term (capital appreciation again become popular acts again). They tend to be more conservative and less volatile than growth funds returns.
Sector funds are stock funds that invest in a sector internal market, such as energy or biotechnology sector. Sector funds are often used by investors to achieve growth; In other words, you choose funds sector, which matches the industries he believes will do well in the future. But sector funds can also be used for other purposes, for example to act as a hedge against other investments in a portfolio. Some common resources sector includes financial services funds, gold funds and precious metals, sickness funds and real estate funds, but there are mutual funds for almost all sectors. To be considered as a sector fund, a fund invests at least 25% of its portfolio in one sector, although many funds sector invests all its investments in a single industry. In general, sector funds are more volatile and risky than mutual funds that invest their assets in a variety of industries.
Large capitals, medium, small and micro caps
Stock funds can also be classified according to the market capitalization of the companies they invest in. The market value of a company is simply the value of the company in the stock market, ie the number of outstanding shares in the company times the price of those shares. There are three main types of funds covers: large cap, mid cap and small cap. Although the dividing line is not necessary, means large capital tend to invest in companies with capital of $ 10 billion, funds average capital tend to invest in companies with market limits to $ 1 trillion, $ 10 billion. Companies with capital under $ 1 billion. Some funds also added a fourth category called MicroCap means to describe funds that invest in companies worth less than $ 250 million. Generally, the lower the average market value of the Fund’s portfolio will be more volatile results; Microcapítulo agents may be especially risky.
Targeted funds are funds that have large positions in a small number of shares. While many investment funds have 100 positions or more, funds focused generally 10 to 40 positions at any given time. They emphasize quality over quantity and prefer to keep only warehouses where they have greater trust, rather than to spread in a large number of farms. In theory this should provide further research and monitoring of their shares, but lose the benefits of diversification and tend to be more volatile than other mutual funds.