The Everything Investing Book by Michele Cagan

Author:Michele Cagan
Language: eng
Format: epub
Tags: ebook, book
Publisher: F+W Media
Published: 2009-09-18T00:00:00+00:00

Specialty funds describe funds that don’t quite fit into any other category. These funds often hold more unusual investments, like precious metals, currencies, commodities, and stock options. These funds come with a higher risk, but they also carry potentially higher rewards.

However, some of these funds cheat a little, albeit legally, by owning a small percentage of lower-grade bonds to balance out their portfolio and—if they pick the right ones—enhance the numbers slightly. As is the case with most funds, there is some flexibility beyond the category in which the fund falls.

Beware of bond funds that buy from corporations issuing bonds that are below investment grade. These junk bonds produce a high-yield fund that can be more volatile than many equity funds. The risk of the company backing this bond is higher and, therefore, the yield is also higher to compensate. In short, junk bond funds mirror junk bonds (which are high-risk bonds), only the fund contains more of them.

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