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What is a stock fund?

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Stock funds invest chiefly in the stock (equity) of different publicly traded companies, generally with the objective of long-term growth through capital gains.  They are actively or passively managed and focus on a certain sector of the market, on companies of a certain size, and on value and growth factors.

A Style Box for Stock Funds
This is a style matrix for equity funds, showing the market valuation (cap) of a fund in terms of large, mid and small, from top to bottom, and the investment style of the fund in terms of value, blend or growth, from left to right, where a given quadrant accordingly indicates the style of the fund.

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This is a style matrix for equity funds, showing the market valuation (cap) of a fund in terms of large, mid and small, from top to bottom, and the investment style of the fund in terms of value, blend or growth, from left to right, where a given quadrant accordingly indicates the style of the fund.

Stock funds are normally classified according to their investment focus:

An index fund is passively managed.  Value, income, balanced and growth funds are actively managed in accordance with the fund's respective investment objective.  A sector fund, which focuses on a certain sector of the market, may be actively or passively managed.

A stock fund’s returns may result entirely from capital return, although dividends are also an important source of total return.  They produce different patterns of returns than individual stocks primarily because they hold diversified portfolios of stocks.

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