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- Index mutual funds attempt to mirror
the performance of stock market indexes, such as the Dow Jones Industrial Average or the Standard & Poor’s 500 Composite Stock Price Index
(S&P 500). They do this by investing in all (or a representative sample) of the companies included in the index. Investing in an index mutual fund
reduces the risk that the fund portfolio will be subject to poor investment decisions. The downside to these mutual funds is that they’re managed for
average performance, so they rarely perform significantly better than the market in general.
- Growth mutual
funds invest in companies that have better-than-average growth potential over time. The earnings of these companies, and therefore their stock values,
are expected to increase. Growth mutual fund investments span a broad range of industries, and may or may not pay dividends. Growth funds are considered
higher risk, so expect significant fluctuation in share price.
- Income mutual funds invest in stocks that have
a history of paying regular dividends. These investments tend to fall in the middle of the risk spectrum for stock mutual funds.
- Growth and income mutual funds generally invest in companies believed to have growth potential and a solid dividend payment record.
They’re designed to help you hedge your bets—even if the share price falls, dividends may offset the loss. Growth and income fall in the middle
of the risk spectrum for stock mutual funds.
- Aggressive Growth mutual fund portfolios include stocks of start
-up companies, smaller businesses or firms in high-risk industries. These stocks may be volatile and should be purchased by those with a higher risk
tolerance.
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