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Saturday, October 11, 2008

Equity Mutual Funds

From The Hoss's Mouth

Equity mutual funds are spotlighted in today's Hoss Cents Free Financial Money Magazine. What is an equity mutual fund? You will no doubt remember from the Hoss's money magazine previous post, types of investments, that equities are stocks. Equity mutual funds are simply funds that invest in stocks.

In horse racing a trainer has a choice of entering his horse in sprints, middle distance or long races. He can also choose to run on a grass or dirt track or a grass track one time and a dirt track the next. Similarly, equities have various capitalization (cap)sizes from which to choose and different investment styles to utilize when purchasing equities for a mutual fund.

S/he can choose a value, growth or blend investment style when purchasing stocks for the mutual fund he manages and he can pick between companies that have a small, medium or large cap.

equity mutual funds

Value Investing: An investment style that utilizes detailed research (called bottom-up) to identify companies that for whatever reason are currently (in the opinion of the fund manager and staff) undervalued. The late John Templeton was a value investor. At the time of this posting there are at great number of stocks undervalued.

Growth Investing: Here the mutual fund manager also utilizes the bottom-up approach to obtain an in depth analysis of individual companies. But rather than pick companies that appear undervalue S/he chooses companies that are in currently in favour and growing rapidly. These stocks come at a high price because of their growth and success and potential for continued positive returns.

Blend Funds: A wide open style of investing. The fund manager could invest in conservative, high risk or specific sector stocks. S/he will usually purchase a large number of stocks in sectors of the economy they expect will increase in value.

The Hoss hopes you find some value (pun intended) in today's post. Remember whatever mutual fund(s) you purchase whether it is an equity mutual fund or otherwise make sure the mutual funds investment style compliments your investment goals and risk assessment.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: Green Mutual Fund Investing

Previous Post: Alternative Energy Mutual Funds


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