There are thousands of mutual funds available in the marketplace, encompassing every investment discipline and type of security you could ever need. Following are brief descriptions of a few of the most common types of mutual funds:

• Stock funds: Although past performance is not a guarantee of future results, as an asset class, stocks have historically provided the highest long-term average annual returns of any major asset class, but have also entailed the greatest risk of short-term fluctuation. ¹ Within the broad category of funds that invest primarily in stocks, you can choose from large, mid-sized and small company funds, domestic and international funds, and sector funds, which invest only in companies of a certain industry. You can also choose from passively managed funds that seek to mirror the performance of a well-established index - like the S&P 500 Index - or those that are actively managed and that attempt to outperform their benchmarks. The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S. stocks that is generally considered representative of U.S. stock market. The S&P 500 Index is not available for direct investment and there are no trading expenses associated with the index.
• Bond funds: Historically, bond funds have often performed differently than stock funds in many types of market environments, and including these funds in an overall portfolio can enhance diversification and potentially reduce overall portfolio risk. ²
There are a number of different types of bond funds with different risk and return characteristics. Although past performance is not a guarantee of future results, in general, long-term bond funds have historically been riskier than intermediate - or short-term bond funds. Funds that invest in U.S. government or high-grade corporate bonds have historically been less risky than those that invest in high yield or emerging market securities. ³ Some bond funds contain only one type of bond; other types of bond funds seek to spread their assets among a variety of types of bonds.
• Balanced or asset allocation funds: These funds invest in more than one security asset class - typically a blend of stocks, bonds and sometimes cash - to provide investors with a single, diversified investment.
• Money market funds: These funds are among the most conservative investments available. They invest in very short-term fixed income investments, which will mature (the issuer will pay back investors' principal) in thirteen months or less, or which have a rate of interest that is readjusted at least once every thirteen months. These funds seek, but do not guarantee, to keep their net asset value at $1. Like all mutual funds, money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC); it is possible to lose money by investing in money market funds.

¹ Source: Ibbotson Associates. Stocks, Bonds, Bills & Inflation 2002 Yearbook™
² Source: Lehman Brothers and Standard and Poors. Bonds are measured by the Lehman Brothers Aggregate Bond Index and stocks are measured by the S&P 500 Index.The Lehman Brothers Aggregate Bond Index is an unmanaged index that is generally considered representative of U.S. bond market activity. The Lehman Brothers Aggregate Bond Index is not available for direct investment and there are no trading expenses associated with the index.
³ Source: Investment Technologies, Inc. Calculations based on monthly returns from November 1984 through October 2001. Risk is measured by the standard deviation of the major fixed income market indices. Standard deviation is a measure of volatility: the more returns vary from the average return, the more volatile the returns are.