Mutual Funds and Hedge Funds

Simply put, stock funds (also sometimes called "equity funds") are mutual funds that invest only in stocks. For that reason, they are considered to be more risky than most other types of funds, such as bond funds or money market funds. Along with the greater risk, however, comes the potential for greater returns. Over long periods of time, equities have historically outperformed both bonds and cash investments, and when stocks do well, stock mutual funds naturally follow suit. But not all stock funds are alike -- these funds can vary greatly according to their stated objectives, their style of management, and the types of companies in which they invest.