“The Baby Boomer Generation”

• “Rights of Accumulation” (ROA) permit a fund shareholder to obtain a sales charge discount on a current purchase if that purchase, added to the shareholder’s existing fund holdings, reaches or exceeds a breakpoint level.
• A “Combined Purchase Privilege” (CPP) allows a purchaser to reach a breakpoint through ROA by combining his or her fund purchases with the purchases made by his or her family members in the same fund company.
• A “Letter of Intent” (LOI) allows a purchaser to receive a sales discount through his or her written promise to purchase sufficient number of fund shares to reach a breakpoint dollar amount within a certain amount of time.

• Aggressive Growth Funds seek to provide maximum growth of capital with secondary emphasis on income, and often invest in emerging growth companies that pay small dividends, if any, but with a potential for rapid growth. They are designed for investors who can afford to assume the risk of potential loss while seeking substantial gains.
• For instance, small-cap funds, which target smaller companies with greater growth potential and risk, would be classified as aggressive. Such funds are subject to wide variations in value. Another example, sector funds, invest in securities of a specific industry or section of the economy (such as pharmaceuticals, health care, or chemicals); they offer a good opportunity for capital appreciation in a growing industry but also involve the risk of potential loss if an economic downturn hits that particular industry. Sector funds offer less diversification benefits than a broad industry fund.
• Growth Funds seek long-term capital growth first and current income second, and tend to favor established companies. Large-cap funds, which tend to specialize in established, dividend-paying companies are often classified as growth funds.Index funds give the investor a broadly diversified portfolio by buying shares in all of the companies in a broad index, such as the S&P 500 Stock Index or some other benchmark. These funds are generally appropriate for someone who will not need to withdraw funds in the near future.
• Growth and Income Funds seek both long-term capital growth and current income, usually by investing in a portfolio of growth and income stocks, or in a combination of growth stocks, income stocks, preferred stocks, convertible securities or fixed-income securities. They are more suitable for investors who want moderate potential for growth and current income along with moderate stability of principal.Balanced funds invest in bonds as well as stocks (Bonds are typically more stable than stocks but bond prices do fluctuate with changes in interest rates. There is still a degree of risk involved if interest rates change.).

  Asset allocation funds are designed to provide diversification: they combine stocks, bonds and money markets, dividing their assets at the fund manager’s discretion to take advantage of the most attractive markets at the appropriate time.

• Income Funds have a primary goal of providing current income with capital growth generally of secondary importance, and are more suitable for investors who are able to assume a degree of capital risk. Equity income funds invest primarily in high-dividend-paying blue chip stocks. There are a variety of bond funds, as well. Municipal bond funds provide shareholders with tax-advantaged income. Others specialize in U.S. government bonds.
• Money Market Income Funds are designed to provide the investor with income as well as with high stability of principal (though generally no capital appreciation) by investing exclusively in short-term debt securities issued by banks, corporations, and the U.S. Treasury (and U.S. government-sponsored enterprises such as Ginnie Mae, Fannie Mae, and Freddie Mac).Some funds, even more conservative, invest strictly in securities whose timely payment of interest and principal is guaranteed by the full faith and credit of the U.S. government. Municipal bond money market funds specialize in investing in short-term, high-rated municipal debt securities in order to provide their shareholders with tax advantages.

International and Global Funds involve an added element of risk since they invest all over the world. Such funds involve added risks associated with currency fluctuations and economic and political instability. International funds generally seek growth through investments in companies outside the United States. Global funds seek growth by investing in securities around the world, including in the United States.

International mutual funds are an excellent way to invest abroad because an individual American investor may be unfamiliar with foreign investment practices and currencies and may not have a clear understanding of economic or political events that can affect foreign securities. Some of these funds concentrate on a particular country, while others on a specific region of the world. Funds in these two categories are generally growth or aggressive growth funds.
 

Risk vs. Reward Spectrum