Since there is virtually a fund for every investment goal, you should have no difficulty finding a fund that fulfills your needs. Small Cap funds have the most potential for growth but can be very volatile. Large Cap funds are also volatile and have potential for growth, but typically to a lesser degree than Small Cap funds. Essentially, indexing involves holding a portfolio of the same securities used by the index in an attempt to match the index's performance as closely as possible. Investors do this because historically the markets have gone up over time.
Indexing allows shareholders to participate in that growth.
Asset allocation funds Generally, asset allocation funds seek to achieve maximum diversification among different types of securities and investments and at the same time maximize returns. Asset allocation funds may include stocks, bonds, money market instruments, precious metals, real estate, and collectibles. Each of these may in turn be broken down into subcategories to achieve the balance and level of diversification chosen by the fund manager. Sector funds Sector funds invest exclusively in companies belonging to one particular industry. You may choose to invest in a sector that you are familiar with or believe will do well.