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Mutual
Fund Basics |
| General
Fund Information Types of Mutual Funds
Return and Risk
Taxes and Mutual Funds
Investment Strategies
Mutual Fund Information Available
How
to Start Investing with
Westcore
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 Feeling
lost as you start to learn about mutual funds and investing? Part of becoming a successful
investor is becoming an informed investor. To help you learn the basics about mutual
funds, fund investment objectives, fund performance, types of risk, and investment
strategies, we've put together the following information. This map of
information will help you decide what
funds best suit your risk tolerance and allow you to meet your investment goals.
General
Fund Information |
What is a mutual fund?
A mutual fund is an investment vehicle that pools money from shareholders and invests in a
variety of securities, including stocks, bonds, and money market instruments. Most open-end
mutual funds continuously offer new shares to investors and are ready to buy back (redeem)
the shares at their current net asset value, which depends on the total market value of
the fund's investment portfolio at the time of redemption.
What are the benefits of investing in mutual funds?
The pooling of shareholder money enables investors to invest a small amount of money and
still obtain the benefits of diversification and professional portfolio management. The
skilled professional management offer their full-time commitment to the management of the
fund, experience, expertise, and greater access to substantial resources. In addition,
mutual funds offer automatic reinvestment of dividends and capital gains, as well as
exchange privileges, where shares in one fund can easily be converted to shares of another
fund. |
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How do investors profit from
mutual funds?
Investors' profits arise from three sources: dividends paid, capital gains paid, and
appreciation in the value of the mutual fund shares. Bond funds typically have income as a
primary objective; therefore, bond funds typically pay income dividends on a regular
basis. Equity funds typically seek growth, but may pay income dividends as well, but
usually not as frequently as bond funds. Capital gains are usually realized at the end of
the calendar year, most frequently by equity funds. In general, most mutual funds, except
money market funds, appreciate in value over time, but that appreciation is not realized
until shares are redeemed.
Some Westcore Equity Funds pay income dividends quarterly and capital gains are paid in
December of each year. Westcore Bond Funds typically pay income dividends monthly and
capital gains, if any, in December of each year. Appreciation on all Westcore Funds is
realized at the time of redemption.
What is the
difference between a load and a no-load fund?
Mutual fund shares can be sold with a sales charge, or "load," which can range
from 4% to 8%. There are a variety of load types, including front-end loads (all of the
load is up-front), contingent deferred load (load fee is spread over investment period)
and back-end load fees (redemption fees). Some mutual funds also have distribution
fees
(also known as 12b-1 fees). These fees are paid out of the assets of the fund to cover the
costs of advertising and marketing. A true no-load fund does not charge any loads or 12b-1
fees, so all of the investor’s money is put directly into the investment.
Westcore Funds are 100% no-load, which means you pay no sales charge
when you purchase or redeem shares. All of your money is put to work right away to achieve
your financial objectives. |
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Types of
Funds |
What are the different types of
mutual funds?
There are basically three types of mutual funds: stock mutual funds, bond mutual funds, and
money market mutual funds. Stock mutual funds (also known as equity funds) invest
primarily in stock issued by U.S. or foreign companies. Bond mutual funds invest primarily
in bond or debt instruments. Money market mutual funds invest mainly in short-term U.S.
government and U.S. agency securities and seek to maintain a $1 per share net asset value.
Westcore Funds offers a family of no-load mutual funds, including equity
funds, bond funds, and a money market fund.How are
mutual funds classified?
Mutual funds can generally be classified by investment objective as follows:
| Growth
Funds |
Seek high capital appreciation
with little or no emphasis given to dividend yield |
| Aggressive
Growth Funds |
Seek maximum capital appreciation |
| Conservative
Growth Funds |
Seek moderate potential for
growth in earnings |
| Growth
and Income Funds |
Seek both reasonable income and
reasonable prospect for growth |
| Balanced
Funds |
Seek to spread portfolio among
equity and debt securities |
| Income
Funds |
Seek to obtain high, consistent
dividend income |
| Specialized
Funds |
Invest in common stock of
corporations in a particular industry or geographic area |
| Special
Situation Funds |
Seek unusual opportunities, such
as mergers, acquisitions, or reorganizations |
| Municipal
Bond Funds |
Offer tax-free income from a
diversified portfolio of municipal bonds, also called "Tax-Exempt Funds" |
| Asset
Allocation Funds |
Invest in a variety of assets
such as U.S. and international securities, real estate, gold, and other precious metals |
What
is the difference between equity and bond funds?
Equity funds primarily invest in stocks, while bond funds (also referred to as income or
fixed-income funds) invest mainly in bond and debt instruments. Equity funds have
historically provided financial growth and appreciation, while bond funds often provide
regular income dividends. Over time, equity funds typically perform better than other
securities and are good long-term investments. Bond funds tend to be less volatile and are
good for diversification, a steady stream of income, or intermediate-term goals.
Westcore Funds offers equity funds and bond funds in its fund family.
Learn more about bond funds with our Bond Fund
Basics.
What is the difference between growth and value funds?
Equity funds can be categorized into two groups: growth and value funds. Growth funds
emphasize stocks believed to have the potential for above-average earnings growth and
capital appreciation. Value funds emphasize stocks believed to be undervalued and have
improving business prospects due to strong company and industry dynamics. Value funds
invest in companies believed to be mispriced compared to the rest of the market.
Westcore Equity Funds include growth funds and value funds.
What is meant by diversification?
Diversification is a way of attempting to reduce the investment risk for a portfolio by
including a variety of assets and/or maturities. Mutual funds achieve diversification by
investing fund money broadly across a number of securities of different companies. A fund
can spread risk by investing in securities of a number of companies within the same
industry, complementary industries, or even entirely different industries.
Individuals also use diversification to spread the risk of their overall holdings.
Different mixes of equity, bond, aggressive, and conservative investments can be used,
depending on your personal situation. In general, the younger you are
and the longer your
investment time horizon, the more aggressive you can afford to be with your
diversification mix. As you get older, or closer to your investment goal, a change to a
more conservative mix may be called for.
Westcore Funds offers equity funds, bond funds, and a money market fund to
help investors achieve a diverse portfolio. |
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Return and Risk |
How do funds measure performance?
Total return is one of the best measures of fund performance because it is the most
comprehensive. It includes the reinvestment of dividends and capital gains, as well as any
change in the fund’s NAV (net asset value). Total return is calculated over specified
periods of time, such as 1-year, 3-year, 5-year and 10-year periods. Yield measures net
income (dividends and interest less expenses) earned during a specific period of time.
While past performance will give investors an idea of how the fund has
fared in the past,
you must remember that past performance is not indicative of future results. What are the different types of risk?
Almost every investment involves some level of risk. There are several types of
risk, including financial risk, market risk, interest rate risk, and timing risk. Different
types of funds are subject to different levels of risk.
One of the best defenses against risk is diversification. When diversification is working
well, poor performance of some investments is offset by stable or better performance of
other investments. Investors can diversify their portfolio by owning different types of
assets, including equity funds, bond funds, and money market funds.
Westcore Funds offers equity funds, bond funds, and a money market fund to
help investors achieve a diverse portfolio.
What is the relationship between risk and return?
Risk and return have a direct relationship. Generally, the greater the level of risk, the
greater the expected return. Different types of funds are subject to different levels of
risk. On average, the following risk spectrum shows the level of risk with the type of
investment. Diversification is one of the best means to reduce investment risk. As an
investor, you need to determine your own level of risk tolerance before investing.
Conservative Risk/Return* |
Moderate Risk/Return* |
Aggressive Risk/Return* |
Money Market Funds |
Fixed-
Income Funds |
Income Funds |
Growth & Income Funds |
Growth Funds |
Aggressive Growth Funds |
* The preceding chart represents the general breakdown of
particular types of funds risk/return level. Specific investments may differ. |
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Taxes
and Mutual Funds |
What taxes do investors pay on
mutual funds?
An investor’s profit on mutual funds comes from three sources: income dividends,
capital gains distributions, and share value appreciation. The income dividends distributed
during the tax year is taxed as ordinary income. Mutual funds identify and distribute
short-term and long-term capital gains. Short-term capital gains are taxed as ordinary
income, but long-term capital gains are taxed at a lower rate. Even if the money is
reinvested into the fund, the investor pays taxes on the distribution in the year it was
distributed. Mutual funds provide investors with a Form 1099 detailing information
concerning distributions for tax computation and filing.What
taxes on fund distributions are due at year-end?
Throughout the year, mutual funds buy stocks, bonds, and other securities that produce
gains or losses when they are sold. The funds also may receive income from dividends or
interest paid on these securities. Each year, the funds are required to distribute to
shareholders any income that exceeds fund expenses and gains that exceed losses.
These distributions are generally taxable to you in the year they are paid, regardless
of whether they are paid in cash or reinvested, even if the value of your shares is below
your cost. However, if you have a retirement plan, Traditional IRA, profit-sharing
account, or
pension plan account(s) (e.g. 401(k), SEP/SAR-SEP), the distributions reinvested in your
account(s) are tax-sheltered.
What taxes do investors pay when they sell their mutual fund
shares?
When an investor chooses to redeem their mutual fund shares, they take either a capital
gain (their net amount received from the sale is greater than their amount invested) or a
capital loss (their net amount received from the sale is less than their amount invested).
Most mutual fund long-term capital gain distributions are taxed at a maximum rate of 20%.
If a capital loss is taken, up to $3,000 per year can be used to offset income in a single
year.
Learn more about distributions and taxes in our prospectus. |
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Investment
Strategies |
Investment Goals
As with many areas of life, you should be working toward a goal with your investments.
Are you investing for supplemental retirement income, higher education costs, a major
purchase, or some other goal? Some goals are more immediate, such as saving for a house or
wedding, while others are more long-term. Establishing goals will help you assess how much
money you will need to invest, for how long, and how much your investments need to earn to
achieve your goals. Benefits of Dollar-Cost Averaging*
Dollar-cost averaging is a systematic approach to long-term investing. The basic concept
involves investing the same amount of money in the same investment at regular intervals.
When the amount you invest is always the same, you end up buying more shares when the
price of shares is low and fewer when the price is high. Over time, this systematic
investment approach has the potential to reduce your average cost per share.
The following table is an example of dollar-cost averaging:
Month |
Amount Invested |
Price per Share |
# Share(s) Purchased |
1 |
$100 |
$10 |
10 |
2 |
$100 |
$8 |
12.5 |
3 |
$100 |
$5 |
20 |
4 |
$100 |
$10 |
10 |
5 |
$100 |
$16 |
6.25 |
6 |
$100 |
$10 |
10 |
Total Amount Invested |
$600 |
Number of Share(s) Purchased |
68.75 |
Average Price per Share
($600 / 68.75 shares) |
$8.72 |
Current Share Price |
$10 |
Special Note: With dollar-cost averaging, investors must be
prepared to invest the same amount at regular intervals, even during downturns in the
market and economy.
Westcore Funds’ Automatic
Investment Plan may allow you to take advantage of the potential benefits of
dollar-cost averaging.
*There can be no assurance that dollar-cost
averaging will ensure a profit or protect from a loss. |
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Mutual
Fund Information Available |
What information is available on
specific mutual funds?
At the very minimum, mutual funds provide potential investors with a prospectus. A
fund’s prospectus includes information such as the fund’s investment objective,
fees and expenses, investment strategies, risks, and how to buy and sell fund shares.
Westcore Funds provides a full prospectus
online or via mail with a complete Investor Kit. Mutual funds also report fund
performance and other important information in their annual report. By examining these
reports, you’ll be able to determine if a fund has been successful in meeting its
goals and investment strategies. The annual report contains the company’s financial
statement and holdings in the fund’s portfolio.
Westcore Funds provides its Annual and
Semi-Annual Reports online or via mail.
How do I read the prospectus?
A fund’s prospectus is a very comprehensive document and should be read before
investing. The prospectus also provides descriptions of the fund’s objectives and
types of securities it invests.
The Westcore Funds prospectus is a single document containing information on all
Westcore Funds. BlackRock Money Market Fund prospectus is in a separate document. These
booklets contain expense information, financial highlights, investment objectives, and
policies. Westcore Funds provides a full prospectus
online or via mail with a complete Investor Kit. |
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