Mutual and Exchange-Traded Fund Types

These flashcards cover various mutual fund categories, market capitalization thresholds, and risk profiles as discussed in the lecture notes.

Growth fund

A fund seeking capital appreciation by aiming to increase investment value over time, primarily investing in common stock, convertible preferred stock, and convertible bonds.

Market capitalization

A measurement of company size calculated by multiplying a company’s outstanding shares by the current market price per share.

Large-cap

A category of companies with a market capitalization of more than $10\text{ billion}$.

Mid-cap

A category of companies with a market capitalization between $2\text{ billion}$ and $10\text{ billion}$.

Small-cap

A category of companies with a market capitalization between $300\text{ million}$ and $2\text{ billion}$.

Micro-cap

A category of companies with a market capitalization of less than $300\text{ million}$.

Aggressive growth funds

Growth funds with a higher risk profile that invest in common stock with high return potential, including small-cap companies and volatile or emerging industries.

Growth and income funds

Also called blend funds, these seek capital appreciation and income by investing in preferred stock and dividend-paying common stock, but do not invest in bonds.

Conservative

A term used to describe low risk investment strategies.

Aggressive

A term used to describe high risk investment strategies.

Balanced funds

Funds that aim for an even mix between growth and income by investing in a combination of both stocks and bonds.

Income funds

Funds focused on producing current income rather than capital appreciation, investing in securities like bonds, preferred stock, and dividend-paying common stock.

High yield bond funds

Income funds that invest in riskier "junk" bonds with higher yields.

Conservative bond funds

Income funds that invest in investment-grade bonds with lower risk and lower yield.

International bond funds

Funds that invest in bonds issued by foreign companies and governments.

Ginnie Mae, Fannie Mae, and Freddie Mac funds

Funds that invest in agency securities backed by the government, receiving income from interest paid on mortgages; suitable for risk-averse investors.

Asset allocation funds

Funds that invest across different asset classes, such as a $60\%$ stock and $40\%$ bond mix, based on a chosen strategy.

Life cycle funds

Also known as target date funds, these are designed to match an investor's timeline by starting aggressive and automatically becoming more conservative over time.

Money market funds

Low-risk, low-yield income funds that invest in short-term debt instruments with one year or less to maturity and are typically priced at a consistent $1.00$ per share.

Specialized funds

Also called sector funds, these focus on a particular industry (e.g., biotechnology) or geographic region (e.g., Japan or Latin America).

Index funds

Funds that aim to match the performance of a specific index, such as the S&P 500, using a passive investing approach.

S&P 500

A well-known index commonly referred to as "the market," consisting of a list of 500 large companies traded in the United States.

Passive investing

An investment approach where a fund does not try to pick the "best" securities but instead tries to match the return of an index as closely as possible.