What is Stock fund ?
Definition of Stock fund
Stock fund also known as equity fund is a fund that simply invests in stocks and securities.
Stock funds are generally for long term and their aim is to gain yield through capital gains. Dividend is also one source of return to consider.
Stock funds are different from bond funds and money market funds.
Brief Explanation of Stock fund
Types of Stock funds:
Growth Funds: This is to invest in businesses and companies which are growing rapidly. Growth funds focus on capital gain rather than dividend and hence they reinvest their profit rather than distributing it amongst the stockholders.
Income Fund: As the name suggests, this fund focuses on income rather than growth as in growth fund option.
Hedge Funds: This is done mainly to reduce the risk of loss in investment. Thus, future inflation, exchange rates and economic conditions are considered before investing.
Balanced Fund: This fund invests in stocks and bonds both at the same time. It’s goal is to increase both principal amount and income hence keeps a balance on both.
Sector Fund: This type invests in same sector or industry in which the they specialize in. These may return higher principal appreciation but are also risky to investor for being non- diversified.
Value Fund: Companies which are old and established with great good will have value stocks. Value funds invests in such value stocks. The income is in the form of dividends.