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DIFFERENT INVESTMENTS FOR DIFFERENT GOALS

Many people think mutual funds are a good place to invest because they are professionally managed and they diversify your investments and allow you to redeem your shares quickly. There are different kinds of mutual funds for different investment needs. To identify the type of fund that could help meet your needs, ask yourself:

1.
What is my goal?
 
Safety, income and growth are common investment goals. What do you want your investment to do for you?
2.
What is my time frame?
 
Is there something you want to buy in a couple of months? Or do you have a goal - like going to college - that may be several years away?
3.
How do I feel about risk?
 
Will you take some risk in the hope of increasing your potential reward? Or are you more cautious, wanting to protect the money you already have?

Once you have answered these questions, check out different kinds of mutual funds to see how each might help you reach your goals.

Money Market funds
Money market securities are short-term debt instruments issued by large companies or the government. When they issue these securities, they are borrowing money and promising to repay it within a short period of time - anywhere from one day to one year.

Money market funds invest in these short-term fixed-income securities, such as bank certificates of deposit (CDs) and commercial paper. Generally, these securities have high credit ratings. A high credit rating makes it very likely that a security's issuer will keep its promise to repay its debts.

The investment objective of a money market fund is to keep the value of your investment stable, while providing the potential for income. Money market fund managers strive to keep the net asset value of their funds at $1 per share. While there is no guarantee that money market funds can do this, and they are not insured or guaranteed by the United States government, they are generally considered to be pretty safe investments. Money market funds, however, tend to have lower returns than other types of funds because of the relative safety of a stable share price. If you plan to use your money soon, you might want to consider investing it in a money market fund.

Bond funds
When a business or government needs to borrow money for a longer period of time, it might issue bonds. Bonds are the financial obligations of the corporation or government that issued them. When an individual purchases a bond, that individual is loaning money to issuer. Bond issuers promise to make regular interest payments on the money they borrow and to repay the amount they borrowed when the bond matures. Because bonds usually pay interest at a set or fixed rate, they are called fixed-income investments.

Bond funds usually invest with the goal of providing income. The level of income a fund produces generally depends upon how much risk the fund takes and the maturities of the bonds in its portfolio. Bond funds offer higher income potential than money market funds, but they also involve more risks.

One such risk is credit risk. There are agencies, like Standard & Poor's and Moody's, that monitor a bond issuer's ability to meet its financial obligations relating to the bonds. These agencies review and rate the issuer's bonds based on the agency's reviews of an issuer's financial statements. If a credit rating falls, then the market value of the bond may fall. This is just one example of an investment risk. The fund's prospectus will describe the principal investment risks associated with the fund.

Also, you may make or lose money when you sell shares. That's because a fund's net asset value goes up and down depending on what happens in the bond market. But if you are looking for more return potential than is offered by a money market fund and less risk than a stock fund, a bond fund might be your best investment choice.

Stock funds
An investor who buys stock in a company receives equity - part ownership - in that company. Each share of stock participates equally in the company's profits and losses. That's why stocks are called equity investments. A stock mutual fund may have investing for growth as its investment goal. The fund's share price will go up and down with the stock market. This is called volatility. If you have to sell your shares when the market is down, you may lose money. But if you are able to maintain a long-term focus - at least four to five years - your investment in a stock mutual fund has the potential to ride out short-term market volatility and grow over time.

It's important to remember that stock mutual funds have investment risks associated with them. One such risk is equity risk, which means that the share prices of the holdings in a fund's portfolio may go down and, as a result, the fund's value may decline. There are also risks associated with the different size companies that a fund may invest in. For example, stock prices of smaller companies may fluctuate more sharply than the stock prices of larger companies. One reason for this is that the stocks of smaller companies may trade less frequently or in smaller numbers than the stocks of larger companies.

If you understand volatility and are willing to take on more risk in the hope of reaching a long-term goal - like paying for college - you may decide to invest in a stock fund.

Hybrid funds
A hybrid fund is a mutual fund that invests in both stocks and bonds. Generally, the investment objective of these funds is to provide income (from both stock dividends and the interest from bonds) and to seek the long-term growth of the fund's assets. Hybrid funds may have the terms "asset allocation" or "balanced" as part of their names. The fund's prospectus will describe the principal investment strategies and investment risks associated with these types of fund.



 
 
Please consider the objectives, risks, charges and expenses of any Columbia fund carefully before investing. Contact your financial advisor for a prospectus, which contains this and other important information about the fund. You should read it carefully before investing.