Real Estate Funds:
- These funds invest in REITS and public real estate stocks. REIT= real estate investment trust. Usually they can be broad market, sectors such as storage units, mall/retail and commercial (office), residential (apartments), industrial (warehouses)
- It is best to get a diversified fund versus sector focused until you know what you are doing.
- You can also buy REIT shares directly through a broker but for now it’s best to buy fund shares so you are diversified and to limit risk an transaction fees.
Hybdrid or Balanced Funds:
- Usually these have a mix of stocks and bonds to give you a little bit of both.
- 60/40 is a typical mix.
- They are usually less volatile than pure stock funds as the purpose of the bonds is to anchor them and provide income while the stock portion gives you the appreciation factor.
- These are funds of bonds (debt). These can be government bonds, municipal, corporate, junk bonds (low grade).
- It’s better to buy a bond fund than individual bonds.
- Bonds are debt so you have credit risk, interest rate risk and duration risk
- Bond price goes up based on quality rating, interest rate (inversely proportional to yield)
- When the Federal Reserve raises or lowers rates this will impact how your fund performs