Fund Category
Figuring out our investment allocation strategy can be a lot like filling out an online dating profile. We have to answer a lot of the same questions:
Are we looking for stability and security?
Do we like to take risks?
Are we looking for a fling or something more long-term?
Where do we see ourselves in 20 years?
Do we like cats?
Okay, that last one might not play too heavily into our investment strategies. Sorry, Fluffy. But the rest of them sure will, which is why it’s so handy that fund categories exist. They're basically a way of organizing mutual funds according to what they do and/or how they do it. Sometimes these fund categories can be simple—a stock category and a bond category—but sometimes, they can get more complex.
For example, if we’re not planning to retire for another 40 years, we might be willing to get a little risky with our investments, since we have plenty of time to try and make up any losses. Knowing this, we might ask our investment broker to allocate a greater amount of our overall mutual fund portfolio toward a more high-risk fund category.
Or if long-term growth potential is what we’re really into these days, we can allocate more toward that type of fund category. Or if we just can’t even with these types of high-stress financial decisions, we can hire firms who specialize in managing portfolios with predetermined fund category allocation levels.
Related or Semi-related Video
Finance: What is a Closed-End Fund?1 Views
Finance a la shmoop what is a closed-end fund? well it's a type of mutual fund [Man approaches mutual fund desk]
only like a bank at any convenient time it's closed
like its assets are enclosed in its price closed means that the fund itself
doesn't actively trade assets back and forth inside of it on a daily basis like
the most famous closed-end mutual fund in the world is Berkshire Hathaway [Man pushing pram of a baby with Berkshire Hathaway briefcase for a head]
Warren Buffett's you know other child the successful one it owns 40 or 50 key
assets from Geico to train companies to metal machinery firms in Israel to
boatloads of shares of stocks like coca-cola and Gillette and Wells Fargo
all of those assets are wrapped up in a tidy BRK bow and the stock market values [Stock market values appear]
ticker BRK daily by trading it back and forth among investors so yes the assets
inside of the fund do change but in an analogous mutual fund that is open the
value placed on the shares is at what is called net asset value, that value is
calculated by just adding up the 843 stocks at the mutual fund owns or however
many the number is and then just calculating a value based on the number [Calculation appears]
of share units comprising that open end mutual fund the closed-end fund has no
changes that way it's just investors valuing the whole bucket of investments
in one closed number now if you'll excuse us we have to get back to [Baby crying in a crib with Berkshire Hathaway briefcase for head]
babysitting for Warren Buffett isn't she just an angel
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