While all equity funds invest in stocks, fund portfolios vary based on the fund's investment objectives and the fund manager's style. Depending on your risk tolerance and financial goals, you can select more aggressive or conservative funds to match your needs. For instance, if you have the time to weather the ups and downs of the market, you might select a more aggressive equity fund that's concentrated in the stock of start-up, growth-oriented corporations. Or, if you're interested in receiving regular dividends, you could select a stock fund that invests exclusively in large-cap, blue chip company stocks.
Other funds invest in companies of different sizes, international corporations, or companies in specific sectors of the economy. Additionally, some choose to invest in more than one type of stock with the objective of obtaining stronger returns.
Understanding the forces that drive the performance of mutual funds is a prerequisite to investing wisely in them.
For equity funds, the performance of the stock market is paramount.
The price of stocks, of course, is influenced as much by investors' perceptions as by such quantifiable factors as earnings and dividend growth or the changes in the economy.
Within subsets of the equity universe, factors influencing performance vary widely.
Diversification does not assure a profit, or protect against loss, in a down market.
Investors should consider the investment objectives, risks, charges, and expenses of a mutual fund carefully before investing. A prospectus contains this and other information. A mutual fund prospectus is available through www.scottrade.com or through a Scottrade branch office. The prospectus should be read carefully before investing.