Types of Mutual Funds
Call Us For Assistance

Shareholder Services

Financial Advisors
1-877-877-5083, option 3

Find a Financial Advisor

Understanding Mutual Funds

Like ice cream, mutual funds come in many different flavors. Together, you and your financial advisor can find the combinations and quantities of mutual fund shares that are right for you based on your circumstances and objectives. Here’s an overview of some of the kinds of mutual funds offered by Nationwide.

Equity mutual funds

Equity mutual funds invest primarily in stocks, including common stock, preferred stock, securities that can be converted into common stock and securities (or other investments) with prices linked to the value of common stock. Equity funds are often defined by the size and style of the companies in which they invest. Large-cap, mid-cap and small-cap funds invest in companies with a specific size referred to as market capitalization. International funds invest in companies headquartered outside the United States.

What is market capitalization?

Market capitalization is the calculation of the total market value of all of a company’s outstanding shares multiplied by the price of one share. In the early 1980s companies with market caps of more than $1 billion were considered large caps. What was once labeled big is considered small by today’s standards. While definitions vary between sources and over time, the financial community currently recognizes the market cap categories listed below.

Market capitalization guide

Large Cap Mid Cap Small Cap Micro Cap
$10 billion and greater $2 billion to $10 billion $300 million to $2 billion Less than $300 million

Types of equity mutual funds

Sector funds

Sector funds primarily invest in the securities of one industry or sector. Examples of sector funds include technology and science funds, health care funds and energy funds.

Fixed-income funds

Fixed-income funds invest in securities, including bonds and other debt securities, which represent an obligation by an issuer to pay a specified interest rate or dividend at specific times.

How do bonds work?

A bond investor loans money to a bond issuer who borrows it for a defined time period at a fixed rate of interest. The issuer promises to repay the investor all principal plus the interest payments. Bonds are issued by corporations, municipalities, states and U.S. and foreign governments, to finance projects and activities. The bond investor earns return on the investment through the fixed interest payments and if the bond price increases during the holding period. Bond prices are influenced by market conditions including changes in interest rates. Typically, when interest rates rise, bond prices fall and when interest rates fall, bond prices rise. Overall, bonds are considered to be less risky than stocks and in most cases, provide a lower return.

Types of fixed-income funds

Index funds

Index funds are constructed to match, or track, the performance of a market index, such as the S&P 500® Index (the name of the market index is sometimes included in the fund’s name). These funds can be less expensive than actively managed funds. They do not attempt to beat the performance of the market index they track.

Asset allocation funds

Asset allocation funds enable you to invest in one fund that provides diversification across a number of asset classes, including stocks, bonds and money market securities, by investing in underlying funds. This strategy seeks to maximize returns while minimizing risks.

Alternative funds

Alternative funds do not invest in stocks, bonds and cash. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts. The returns of alternative investments generally have a low correlation to more standard asset classes.

Share Article