Mutual Funds Glossary

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401(k) Plan

An employer-sponsored retirement plan that enables employees to defer taxes on a portion of their salaries by earmarking that portion for the retirement plan. Several investment options, including a range of funds, are generally offered.

403(b)(7) Plan

A type of individual retirement account (IRA) designed specifically for employees of qualifying nonprofit organizations (i.e., public schools, public hospitals, churches). A 403(b)(7) plan enables these employees to defer taxes on a portion of their salaries by earmarking that portion for the retirement plan. Several investment options, including funds, are generally offered for investment.

Family of Funds

A fund's cost of doing business. All of a fund's expenses are disclosed in the prospectus as a percentage of assets.

Financial Services Funds

A fund that invests primarily in the stocks of companies engaged in providing financial services, including banks, finance companies, insurance and securities or brokerage firms.

Fixed Income Security

A security that pays a fixed rate of return. This term is usually used in reference to government, corporate or municipal bonds, which pay a fixed rate of interest until the bonds mature, and to preferred stock, which pay a fixed dividend. Fixed income securities offer the guarantee of a fixed return, but do not offer an investor much, if any, potential for growth.

Flexible Portfolio Funds

A fund that can invest in stocks, bonds and cash in whatever proportion the manager deems appropriate, providing the manager total flexibility to achieve maximum returns. Flexible portfolio funds are sometimes called asset allocation funds.

Front-End Load

One of three possible sales charge schedules imposed by funds that charge fees. A front end load, or "upfront charge" is a fee charged on the initial purchase of fund shares, and can range from 3% to 8% of the purchase amount. Funds sold under several sales charge options usually refer to the shares sold with a front end load as "Class A shares."

Fully Invested

The investment of nearly all available assets in securities other than short-term securities (such as savings and money market accounts). When a fund is said to be "fully invested," it usually implies that the fund's manager is confident that the securities markets will be improving.

Fund of Funds

A fund that invests only in the shares of other open-end funds. Fund of funds were popular during the 1960s but have subsequently fallen out of favor with most investors.