Three Types Of U.S. Stock Mutual Funds

Three types of u.s. stock mutual funds. When choosing a U.S. stock mutual fund, you can pick from an aggressive-growth fund, long-term growth fund, or growth & income fund. Here are the differences between the three.

The majority of people who want to invest their money in a U.S. mutual fund usually choose a stock fund over a bond fund or money market fund because of the potential for a greater return. However, once you decide to invest in a U.S. stock mutual fund, you will find three different types that you can choose from: aggressive-growth, long-term growth, and growth & income. Here's a description of each of those three types of stock funds to help you decide which is best for you.

1.) Aggressive-growth funds typically invest in stocks of small or fast-growing companies, such as Internet companies or other types of new-age technology firms. You need a strong stomach to be able to handle the up-and-down ride that you will get from a fund like this, but if you're in it for the long-term, history has shown that the ride usually goes up more than down.

2.) Long-term growth funds are more stable than aggressive-growth funds because they tend to invest in stocks of larger companies with more stable businesses and steadier growth rates (such as stocks you find on the Dow Jones 30). Such funds make good long-term investments for those uncomfortable with the sharp turns of aggressive-growth funds.

3.) Growth & income funds are designed to milk the cash cows of the investment world. They invest in stocks of stable companies that are growing at a modest rate and pay steady dividends (such as Intel and utility companies). Growth & income funds are often a good first step for cautious investors.

In the past 10 - 20 years, aggressive-growth funds have proven most rewarding to investors, followed by long-term growth and growth & income funds. But short-term, anything can happen. Decide what your time-frame is when picking a fund, then decide which type you feel will be best for your goals. Of course, consulting a financial planner to help you with your choice is always a good option if you don't feel confident enough to do it yourself.

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