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Composition

Composition breakdown allows investors to glean information about the portfolio's investment strategy. A portfolio with a large percentage of its assets in cash, for example, might indicate a defensive position, while a heavy bond exposure in a balanced fund may reveal a solid income orientation.

In knowing a fund's composition, an investor can be sure that he or she is getting the type of fund they're looking for. If you are looking for an aggressive growth fund, for example, the fund's composition shouldn't reveal a 25% bond position.

Cash encompasses both the actual cash and the cash equivalents (fixed-income securities with maturities of one year or less) held by the portfolio.

Investors should note that negative percentages of cash indicate that the portfolio is leveraged, meaning it has borrowed against its own assets to buy more securities or that it has used other techniques to gain additional exposure to the market.

The percentage listed as stocks incorporates only the portfolio's straight common stocks.

Bonds include every fixed-income security with a maturity of more than one year, from government notes to high-yield corporate bonds.

Other includes preferred stocks (equity securities that pay dividends at a specified rate), as well as convertible bonds and convertible preferreds, which are corporate securities that are exchangeable for a set amount of another form of security (usually shares of common stock) at a prestated price. Other also includes all those not-so-neatly categorized securities, such as warrants and options.

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