To define goals, pin down definitions

ONE way to select a mutual fund is to examine your investment objectives and then pick a fund that matches those objectives. To help with this, here's a list of fund types and their objectives, as presented in a recent issue of Personal Investing, a semimonthly newsletter published by Fidelity Investments in Boston: Capital appreciation fund. Any fund that meets at least two of the following criteria: (1) the investment objective in the prospectus is capital appreciation, or similar wording; (2) turnover rate of 100 percent or more is either expected or realized; (3) the fund is permitted to borrow more than 10 percent of the value of its portfolio; (4) the prospectus permits short selling, purchase of options, or investing in stocks or unregistered securities.

Growth fund. A fund that normally invests in companies whose long-term earnings are expected to grow significantly faster than the earnings of the stocks represented in the major unmanaged stock averages.

Growth and income fund. A fund that combines the objective of earnings growth with an income requirement to achieve level or rising dividends.

Equity income fund. A fund that normally has 60 percent or more of its assets in equities and has an above-average yield.

Small-company growth fund. A fund whose prospectus language and portfolio practice limit its investment to companies on the basis of the size of the company. (Those funds that use smaller companies some of the time or in conjunction with larger companies will not be considered a small-company growth fund.)

Global fund. A fund that invests at least 25 percent of its portfolio in securities traded outside the United States and may own US securities as well.

International fund. A fund that invests more than 50 percent of its assets in securities whose primary trading markets are outside the United States.

Gold fund. A fund that has at least 50 percent of its assets in shares of gold mines, gold-oriented finance houses, gold coins, or bullion.

Balanced fund. A fund whose primary objective is stability of net asset value, achieved by maintaining a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio is roughly 40/60 percent.

Income fund. A fund that normally invests less than 75 percent in fixed-income issues and less than 50 percent in equities, and whose principal aim is the generation of income.

Natural resource fund. A fund that typically invests more than 50 percent of its equity commitment in natural resource stocks.

Specialty fund. A fund that limits its investments to a well-defined specialty, such as banks and utilities. Sometimes these are called sector funds.

Option growth fund. A fund that attempts to increase its net asset value by investing at least 5 percent of its portfolio in options.

Fixed-income fund. A fund with more than 75 percent of its assets in fixed-income issues, such as money market instruments, bonds, and preferred stocks.