- An IRA is simply a title assigned to a savings or investment account. IRS rules dictate limits on amounts that can be invested, the duration of time (in age) it must remain in place, and--in some instances--what it can generally be invested in. Common investments are CD's, mutual funds and individual stocks and bonds.
- Mutual funds are diversified funds that an investment company manager invests in varying asset classes: stocks, bonds, stocks and bonds, or money-market (cash equivalent) securities.
- Growth mutual funds invest predominantly in a number of stocks of companies with the goal of growth of capital. Growth-oriented mutual funds are the most volatile and potentially rewarding.
- Funds with an objective of income invest in a number of fixed-income bonds issued by a government or a company. As a rule, they have less volatility than equity funds and earn a stable stream of income in the form of interest. These funds represent a more stable, conservative approach.
- Balanced mutual funds are a blend of both growth and income assets. Their objective and performance falls in between those of growth funds and income funds.
- Generally regarded as the most conservative of funds, these mutual funds invest in very stable assets whose underlying price does not fluctuate. Examples would be CD's, short-term Treasury bills and commercial paper, among others.
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