Types of Mutual Funds

Becoming familiar with the different mutual fund types will help you select the
funds appropriate for your personal financial situations. It is important to not
e that there is market risk involved when investing in mutual funds, including p
ossible loss of principal.
While there are many types of mutual funds, most typically fall into the followi
ng categories, based on their investment objectives:
Equity or stock funds
Aggressive growth funds: These funds seek long-term growth by investing in stock
s of small to mid-sized companies. Stocks of these companies tend to have greate
r potential than the market, but also greater risk.
Growth funds: These funds seek long-term growth by investing in stocks of large,
well-known corporations. These funds are typically less volatile than funds tha
t invest in small and mid-sized companies but do not offer as much growth potent
ial.
The universe of equity funds can also be divided by where they invest: U.S. stoc
ks or international stocks.*
Combined or hybrid funds
Growth and income funds: These funds typically invest in stocks and bonds. Stock
s are known for their growth potential, bonds for their income-producing capabil
ities. Growth and income funds do not have as much growth potential as growth fu
nds but tend to be less volatile in price.
Bond or fixed income funds
Income funds: Income funds generate a steady stream of income, usually monthly o
r quarterly, by investing in bonds or other income-producing securities. They te
nd to provide more income and are typically less risky than funds that invest st
rictly in stocks or a combination of stocks and bonds.
Money market or cash equivalent funds
Money market funds: Money market funds are mutual funds that invest in money mar
ket securities such as Treasury Bills, Certificates of Deposit, and commercial p
aper. Money market funds have historically been highly liquid, relatively safe i
nvestments.**
*Investing in international markets involves certain risks not typically associa
ted with investing in the United States including foreign currency fluctuations
and economic or political risks.
** Investments in money market funds are neither insured nor guaranteed by the F
ederal Deposit Insurance Corporation or any other government agency. Although mo
ney market funds seek to preserve the value of an investment at $1.00 per share,
it is possible to lose money by investing in a money market fund.
It is important to note all bonds are subject to interest rate risk, including t
hose issued by the U.S. Government. There is risk that the bonds a fund holds ma
y decline in value due to an increase in interest rates.
State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Fund
s Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 584 K
B) .