TYPES OF FUND

MONEY MARKET FUNDS INCOME FUND

INCOME AND GROWTH FUNDS GROWTH AND INCOME FUNDS
BALANCED FUNDS GROWTH FUNDS
INDEX FUNDS SECTOR FUNDS
SPECIALIZED FUNDS ISLAMIC FUNDS

Not too many years ago, mutual funds were simply broad-based
investment instruments created to simplify the intricacies involved in
investing in separate securities. They also provided a greater measure of
safety through broad diversification and the kind of top notch professional
management that is usually out of reach for the small investor.

Today, however, mutual funds are highly specialized and offer almost
unlimited diversity. The types of mutual fund portfolios available run the
gamut from conservative to aggressive, from stocks to bonds, from
domestic to international portfolios, from taxable to tax-free, and from
virtually no-risk money market funds to high-risk options funds. The great
variety of mutual funds available makes it possible to select a fund, or
several funds, which precisely various types of funds and their primary
objectives are described below. (They are arranged in order of increasing
risk factors)

Money Market Fund

We begin with a discussion of money market funds for several reasons:

1. They are the safest for the novice investor;

2. They are the easiest, least complicated to follow and understand;
3. Almost without exception, every mutual fund investment company
offers money market funds;
4. Money market funds represent an indispensable investment tool for
the beginning investor.
5. They are the most basic and conservative of all the mutual funds
available;

Money market funds should be considered by investors seeking stability

of principal, total liquidity, and earnings that are as high, or higher, than
those available through bank certificates of deposit. And unlike bank cash
deposits, money market funds have no early withdrawal penalties.

Specifically, a money market fund is a mutual fund that invests its assets
only in the most liquid of money instruments. The portfolio seeks stability
by investing in very short-term, interest-bearing instruments issued by
the state and local governments, banks, and large corporations. The
money invested is a loan to these agencies, and the length of the loan
might range from overnight to one week or, in some cases, as long as 90
days. These debt certificates are called "money market instruments";
because they can be converted into cash so readily, they are considered
the equivalent of cash.

To understand why money market mutual funds is recommended as an

ideal investment, let me reemphasize just seven of the advantages they
offer:

1. Safety of principal, through diversification and stability of the short-

term portfolio investments
2. Total and immediate liquidity, by telephone or letter
3. Better yields than offered by banks, 1% to 3% higher
4. Low minimum investment, some as low as $100
5. Professional management, proven expertise
6. Generally, no purchase or redemption fees, no-load funds

Income Funds

The objective of income mutual funds is to seek a high level of current

income commensurate with each portfolio's risk potential. In other words,
the greater the risk, the greater the potential for generous income yields;
but the greater the risk of principal loss as well.

The risk / reward potential is low to high, depending upon the type of
securities that make up the fund's portfolio. The risk is very low when the
fund is invested in government obligations, blue chip corporations, and
short-term agency securities. The risk is high when a fund seeks higher
yields by investing in long-term corporate bonds, offered by new,
undercapitalized, risky companies.

Who should invest in income funds?

§ Investors seeking current income higher than money market rates, who
are willing to accept moderate price fluctuations
§ Investors willing to "balance" their equity (stock) portfolios with a fixed
income investment
§ Investors who want a portfolio of taxable bonds with differing maturity
dates
§ Investors interested in receiving periodic income on a regular basis.

Income and Growth Funds

The primary purposes of income and growth funds are to provide a

steady source of income and moderate growth. Such funds are ideal for
retirees needing a supplement source of income without forsaking growth
entirely.

Growth and Income Funds

The primary objectives of growth and income funds are to seek long-term
growth of principal and reasonable current income. By investing in a
portfolio of stocks believed to offer growth potential plus market or above
- market dividend income, the fund expects to investors seeking growth
of capital and moderate income over the long term (at least five years)
would consider growth and income funds. Such funds require that the
investor be willing to accepts some share-price volatility, but less than
found in pure growth funds.

Balanced Funds

The basic objectives of balanced funds are to generate income as well as

long-term growth of principal. These funds generally have portfolios
consisting of bonds, preferred stocks, and common stocks. They have
fairly limited price rise potential, but do have a high degree of safety, and
moderate to high income potential.

Investors who desire a fund with a combination of securities in a single

portfolio, and who seek some current income and moderate growth with
low-level risk, would do well to invest in balanced mutual funds. Balanced
funds, by and large, do not differ greatly from the growth and income
funds described above.

Growth Funds

Growth funds are offered by every investment company. The primary

objective of such funds is to seek long-term appreciation (growth of
capital). The secondary objective is to make one's capital investment
grow faster than the rate of inflation. Dividend income is considered an
incidental objective of growth funds.

Growth funds are best suited for investors interested primarily in seeing
their principal grow and are therefore to be considered as long-term
investments - held for at least three to five years. Jumping in and out of
growth funds tends to defeat their purpose. However, if the fund has not
shown substantial growth over a three - to five-year period, sell it
(redeem your shares) and seek a growth fund with another investment
company.

Candidates likely to participate in growth funds are those willing to accept

moderate to high risk in order to attain growth of their capital and those
investors who characterize their investment temperament as "fairly
aggressive."
Index Funds

The intent of an index fund is basically to track the performance of the

stock market. If the overall market advances, a good index fund follows
the rise. When the market declines, so will the index fund. Index funds'
portfolios consist of securities listed on the popular stock market indices.

It is also the intent of an index fund to materially reduce expenses by

eliminating the fund portfolio manager. Instead, the fund merely
purchases a group of stocks that make up the particular index it deems
the best to follow. The stocks in an index fund portfolio rarely change and
are weighted the same way as its particular market index. Thus, there is
no need for a portfolio manager. The securities in an index mutual fund
are identical to those listed by the index it tracks, thus, there is little or
no need for any great turnover of the portfolio of securities. The funds
are "passively managed" in a fairly static portfolio. An index fund is
always fully invested in the securities of the index it tracks.

An index mutual fund may never outperform the market but it should not
lag far behind it either. The reduction of administrative cost in the
management of an index fund also adds to its profitability.

Sector Funds

As was noted earlier, most mutual funds have fairly broad-based,

diversified portfolios. In the case of sector funds, however, the portfolios
consist of investment from only one sector of the economy. Sector funds
concentrate in one specific market segment; for example, energy,
transportation, precious metals, health sciences, utilities, leisure
industries, etc. In other words, they are very narrowly based.

Investors in sector funds must be prepared to accept the rather high level
of risk inherent in funds that are not particularly diversified. Any measure
of diversification that may exist in sector funds is attained through a
variety of securities, albeit in the same market sector. Substantial profits
are attainable by investors astute enough to identify which market sector
is ripe for growth - not always an easy task!

Specialized Funds

Specialized funds resemble sector funds in most respects. The major

difference is the type of securities that make up the fund's portfolio. For
example, the portfolio may consist of common stocks only, foreign
securities only, bonds only, new stock issues only, over - the - counter
securities only, and so on.

Those who are still novices in the investment arena should avoid both
specialized and sector funds or the time being and concentrate on the
more traditional, diversified mutual funds instead.

Islamic Funds

In case of Islamic Funds, the investment made in different instruments is

to be in line with the Islamic Shairah Rules. The Fund is generally to be
governed by an Islamic Shariah Board. And then there is a purification
process that needs to be followed, as some of the money lying in reserve
may gain interest, which is not desirable in case of Islamic investments.

Bruce Jacobs, All About Mutual Funds, McGraw Hills I-nc. 2001, Pg. 17.