INDEX FUNDS

An investor wishing to keep his or her mutual fund's pace in line with a measurement of the market like the Standard and Poor's 500 may consider index funds. These funds are made up of the securities that represent major market indexes. The advantage of index funds is that they are always in line with the market as a whole. Their downside is that they can't outperform the market.

Index funds that use the same market index are not the same, however. Some divide their holdings evenly among the various stocks, and some divide them by dollar weights, so that bigger companies represent a larger share.

Before we close, we will look at some lesser-known kinds of mutual funds.