Mutual fund types

Initially, mutual funds only invested in equities (stocks). Because the bond market is roughly twice the size of the stock market, it didn’t take long for mutual funds to start investing in bonds too. As time passed, the number of funds increased as they began to specialize in certain types of investments: foreign-country bonds, high-tech stocks, high-yield (junk) bonds, and so forth.

There are tens of thousands of securities (stocks, bonds, etc.) to choose from, but not all of them are equally successful. The staff of every mutual fund scours their universe for the best 30 or 40 investments which amateurs like you and I easily miss. The best fund managers become highly paid celebrities: Peter Lynch achieved international fame by building his Fidelity Magellan Fund into the largest mutual fund in America.

via Investing 101: A primer on mutual funds.


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