DEFINITION of 'Common Stock Fund'

A mutual fund that invests in the common stock of numerous publicly traded companies. Common stock funds provide investment diversification and offer time savings over researching, buying and selling individual stocks. Common stocks are shares of ownership in a corporation that doesn't confer any special privileges, such as guaranteed dividends or preferred creditor status. Investing in a fund that specializes in common stock can provide cost savings if the fund's loads and management fees are lower than the commissions associated with buying and selling individual stocks.

BREAKING DOWN 'Common Stock Fund'

A common stock fund will always be specialized in some way. It might invest in all the companies in the S&P 500, or it might invest only in small-cap tech stocks or mid-cap dividend-paying value stocks, for example. The fund will usually name itself after its specialization and not call itself a common stock fund, because the term "common stock fund" is so broad.

Also, some funds call themselves common stock funds because they invest primarily in common stock (perhaps 80% of the fund's investments), but they might also invest in other types of securities (perhaps 20% of the fund's investments). Investors should look beyond the fund's name and see what it actually owns, when evaluating whether the fund is a good fit for their investment objectives.

RELATED TERMS
  1. Common Stock Equivalent

    Securities such as stock options, warrants, preferred bonds, ...
  2. Diversified Common Stock Fund

    A mutual fund that invests its assets in a relatively large number ...
  3. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  4. Common Stock

    A security that represents ownership in a corporation. Holders ...
  5. Capital Appreciation Fund

    A mutual fund that attempts to increase asset value primarily ...
  6. Equity Fund

    A mutual fund that invests principally in stocks. It can be actively ...
Related Articles
  1. Financial Advisor

    Top 5 American Funds for Retirement Diversification in 2016

    Discover five mutual funds from industry leader American Funds with high yields that are perfect for retirement savings diversification.
  2. Investing

    The Benefits of Picking Mutual Funds Over Individual Stocks

    Learn about the advantages of investing in mutual funds rather than individual stocks, including the benefits of affordability, oversight and diversification.
  3. Investing

    How Mutual Fund Managers Pick Stocks

    Learn about how mutual fund managers choose stocks based on the type of funds they manage and the investment goals of the funds' shareholders.
  4. Investing

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  5. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  6. Investing

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  7. Financial Advisor

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  8. Managing Wealth

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
  9. Investing

    The Top 5 Equity Mutual Funds for 2016

    Understand how equity securities can enhance an investor portfolio, and discover the five best equity mutual funds to consider for 2016.
RELATED FAQS
  1. Can mutual funds only hold stocks?

    Learn about which types of mutual funds consist of only stocks, which may include stocks in addition to other assets and ... Read Answer >>
  2. What is the difference between the equity market and the stock market?

    Discover the basic information about the equity, or stock, market and the two primary classifications of equities that are ... Read Answer >>
  3. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  4. Can anyone own common stock in a company?

    Understand who can purchase common stock as well as the key characteristics that differentiate common stock from preferred ... Read Answer >>
  5. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center