Equity funds come in many shapes and sizes. Growth funds contain stocks of growing companies, which reinvest their earnings into expansion and development of the business and generally pay no dividends. Income funds buy stocks of well-established companies whose growth potential has slowed but do pay dividends. Value funds invest in companies whose stocks are trading for less than the portfolio managers think they are actually worth. A growth and income fund combines characteristics of the growth fund and the income fund. Blend funds combine growth funds and value funds.
International funds,also known as foreign stock funds, invest in countries outside the investor’s country of residence. Sector funds invest in a specific industry or sector of the economy and therefore are not as diversified as other types of mutual funds.
All these equity fund classifications are also characterized by their market capitalization, or the size of the companies in the fund as measured by the value of their outstanding shares. Large-cap funds invest in companies whose share value might typically exceed $10 billion, mid-cap funds in companies greater than $2 billion, and small-cap funds on companies under $2 billion.
