Fund Category

Understanding Fund Categories: A Guide to Diversifying Your Investment Portfolio

Investing in mutual funds offers diversification benefits, and fund categories play a pivotal role in structuring portfolios. In this comprehensive guide, we'll explore the nuances of fund categories, how they're used by both retail and professional investors, and the various types available in the investment universe.

Breaking Down Fund Category

Fund categories serve as a classification system for mutual funds, aiding investors in selecting funds with diverse risk and return profiles. Understanding the structure of fund categories is essential for constructing well-balanced portfolios tailored to individual investment objectives.

Professionally Managed Fund of Funds

Professionally managed fund of funds exemplifies how portfolio managers construct diversified portfolios using funds from different categories. These funds aim to achieve targeted asset allocation objectives by investing in a mix of funds across various categories. Real-world examples, like the Pacific Funds Portfolio Optimization Growth Fund, illustrate the application of this strategy in practice.

Fund Investing for Retail Investors

Retail investors can leverage fund categories to build comprehensive portfolios aligned with their investment goals and risk tolerances. By understanding their investment profile and available options, investors can craft diversified portfolios that meet their unique needs, whether through professional advice or a DIY approach.

Targeted Asset Fund Categories

Investors may opt to invest by asset category, focusing on specific asset classes such as stocks and bonds. Differentiating between stock funds based on company size and bond funds based on maturity and credit quality allows investors to tailor their portfolios to their risk preferences and investment objectives.

Managed Objective Fund Categories