Fund Category

DEFINITION of 'Fund Category'

A way of differentiating mutual funds according to their investment objectives and principal investment features. This categorization allows investors to spread their money around in a mix of funds with a variety of risk and return characteristics.

BREAKING DOWN 'Fund Category'

With stock funds, the basic categories are defined by the size of the companies in which the fund invests - large-cap, mid-cap and small-cap - and investment style - value, growth and blend (value/growth mix). Specialty stock funds (real estate, healthcare, etc.) and international funds offer additional opportunities.

Bond funds are categorized principally by their average portfolio maturities - long, intermediate and short - and credit quality - high, medium and low. Municipal and international funds provide additional bond investment diversification.

Hybrid, or asset allocation, funds offer a mix of stock and bond investments and come in two types: conservative and moderate allocation.