Growth-oriented funds typically invest primarily in stocks and seek capital growth through price appreciation of the securities in their portfolios. Since capital growth is the main objective of these funds, they generally pay dividends on an annual or semi-annual basis (as opposed to income funds which pay dividends more frequently) and their dividend rates may be well below that of income-oriented funds.

Growth funds vary widely in their investment strategies. For example, an aggressive growth fund may invest in highly speculative, small company stocks, whereas a more conservative growth fund may invest only in the stocks of large, well-established companies. There are also funds which invest only in certain industries or industry sectors, such as technology or healthcare. The share price volatility of a growth fund will be directly related to the volatility of the stocks in its portfolio.

Growth & Income funds try to achieve the best of both worlds. Their objective is to provide investors the opportunity for capital growth while also providing current income. These funds are generally considered a more conservative approach to stock investing.

People who want high current rates of return often turn to funds that have current income as their investment objective. Generally, these funds invest in debt securities (bonds) issued either by governments or corporations (although they can also invest in income-producing stocks), and pay dividends either monthly or quarterly.

As with stock funds, share prices of long-term income funds will vary with the value of the securities in the portfolio. Therefore it is important to know exactly what types of bonds are held in the portfolio. For example, a "high-income" fund may invest in bonds of a more volatile nature than a fund investing only in high-quality corporate or government bonds. To help you determine the potential share price volatility of an income fund, you should inquire about the quality of the bonds in the portfolio (higher quality funds provide lower risk but also lower yields), the fund’s yield (if it is relatively high, you may be assuming more risk), and it’s average maturity (the longer the average maturity, the more volatile the share price and the higher the yield).

Few investments allow individuals to earn income without having to pay taxes on those earnings. Fortunately, tax-free bond funds are one of the exceptions, and for that reason have become extremely popular with investors.

Municipal securities are debt instruments, or bonds, usually issued by state and local governments and their agencies. These bonds are unique because the interest earned on them is generally exempt from federal income tax. Furthermore, for residents of the state where the bonds were issued, the income earned on these bonds is generally free from both state and local income taxes as well. Mutual funds that invest in municipal bonds distribute this tax-free interest to shareholders in the form of monthly or quarterly dividends.

These funds offer somewhat lower yields than comparable taxable bond funds, but for many investors, especially those in higher tax brackets, the tax savings more than makes up for the lower yields.

Because these funds invest in extremely short-term debt securities, they are able to offer investors a more stable price per share than any other type of mutual fund. In fact, money market funds seek to maintain a constant $1.00 share price, although this cannot be guaranteed. Shareholders in these funds generally enjoy a high level of liquidity, or accessibility to their money, through check-writing privileges and receive monthly income dividends. Because of the very short-term nature of a money market fund portfolio, the yields on these funds will be relatively low compared with other types of income funds and will adjust frequently to reflect prevailing short-term interest rates.

When you invest in any mutual fund, the cost of investing should be one of your primary concerns as an informed investor. Investing in a mutual fund is not entirely free. There are expenses involved in the management of all funds, but some funds are much more costly for the investor than others. The primary source of this added cost is the sales charge, also known as the "load" in mutual fund jargon. Perhaps you have heard or read about load and no-load funds and the advantages of one over the other. We’d like to help you understand the differences between these types of funds so that you can decide which is best for you.

Q. What exactly does "no-load" mean?

A. Perhaps first we should define the word "load." A sales load is a charge imposed on the purchase or sale of mutual fund shares. A load can take several forms. A front-end load is deducted immediately when shares of a fund are purchased, whereas a deferred load is imposed when fund shares are sold. A level load, also known as a 12b-1 fee or trail commission, is charged on an annual basis each year you own the fund and generally takes the form of higher fund expenses and lower yields. Although few mutual funds impose all three of these fees, many charge two of them.

Whatever form it takes, the purpose of the load is to pay a sales commission to the investment broker or financial representative selling the mutual fund. Investors considering the purchase of a load fund should ask their broker to explain exactly how the load will be charged. We recommend that you ask specific questions such as, "If I sell this investment within one year, what will my total out-of-pocket expense be?" Remember, it’s your money.

With the purchase of load funds becoming more complicated all the time, Dupree’s 100% no-load funds offer refreshing simplicity. At no time does the investor pay a sales charge of any kind. A no-load fund eliminates the middle man (the broker) from the investment process, allowing the investor to purchase fund shares directly from the fund company without paying a sales charge.

Q. If I invest in a no-load fund, will I give up professional advice and dependable service?

A. Not if you invest with Dupree Mutual Funds. From the moment you make your first call to us, our highly trained staff is here to answer all of your investment questions and to provide prompt personal service.

Although Dupree offers only fixed income funds, our fully-licensed securities representatives are qualified to help you consider the full range of investment choices available today. Since our representatives earn salaries, not sales commissions, you’ll receive objective, expert advice, not a high pressure sales pitch.

Should you decide to invest with us, you’ll find that the service we provide to our shareholders is unsurpassed. Every transaction is confirmed to you in the form of an accurate easy-to-read statement, and all of your account records are immediately accessible to our shareholder service representatives. Naturally, an occasional question about your account will arise. Our representatives will always go the extra mile to answer every question thoroughly and in a courteous manner.

Q. This sounds almost too good to be true! Obviously Dupree doesn’t manage these funds for free. How do you make money?

A. Like all mutual funds, load and no-load, we make our money from a management fee. (Load funds charge a load in addition to their management fee.) This fee is included in each fund’s total expenses, a figure that is available from any of our representatives or by looking in the Prospectus under "Trust Expenses." These expenses are NEVER deducted from your investment; they are paid out of each fund’s dividend income, the remainder of which is distributed to the shareholders. We make every effort to keep our fund expenses among the lowest available in order to maximize the amount paid to shareholders. Again, any of our representatives will be happy to discuss fund expenses with you.

Q. Does eliminating the sales load really make much difference?

A. We’ll let you be the judge of that. Suppose that you decide to invest $10,000 in Fund XYZ which charges a 5% front-end sales load. If for some reason you had to sell your investment, you would receive $9,500--not $10,000, assuming an unchanged share price. In other words, just to break even, your investment has to earn $500 either through dividends or capital appreciation. To put it another way, when you invest in Fund XYZ, you have an immediate negative 5% return.

A deferred load (known as a contingent deferred sales charge) has the same end result, but delays the payment of the load until you sell your shares of the fund. Suppose you decide to purchase Fund XYZ’s "Class B" shares which are subject to a deferred sales charge. If you have to sell your investment within the first year, you’ll be subject to as much as a 5% charge which will come directly out of your investment principal. The deferred charge generally declines over a number of years, so if you hold your investment long enough, you won’t have to pay it. HOWEVER! You will have paid for this privilege all along through higher fund expenses and therefore lower yields.

For example, suppose load fund XYZ quotes a one-year total return of 10%. Sounds pretty good, right? But remember, to realize total return, you must first sell your investment. If you sell either the front-end load shares or the deferred load shares of Fund XYZ within one year, you will have an immediate 5% loss. Therefore, Fund XYZ’s 10% one-year total return is really only 5% once the load is subtracted.

Q. So how do I go about comparing a load fund with a no-load fund?

A. You’ll have to do a little homework. First of all, you should be sure that you are comparing two funds with the same investment objective, for example, two government bond funds or two tax-free municipal bond funds. Next, we suggest that you ask several questions of the person recommending the load fund to you. For example; What is this fund’s load-adjusted total return? Exactly how much is the sales charge and when do I pay it? How much of my money will actually be invested in securities (only $9,500 of $10,000)? How much is the fund’s 12b-1 fee and how will it affect my first year’s total return?

We'll be happy to help you find answers to these questions and more. Find out what a pleasant and rewarding experience no-load investing can be with Dupree Mutual Funds.

HOW TO REACH US

---