The advantage of index funds is that they are always in line with their market index. Their downside is that they cannot outperform the market. Some funds divide their holdings evenly among the various stocks. Some use dollar weighting so that bigger companies comprise a larger share. Read the tutorial on Index Mutual Funds to learn more.
Balanced funds seek to balance growth and income in one portfolio.
To do this, they invest in common stock, preferred stock, bonds and cash equivalents. Managers of balanced funds can, however, shift this ratio one way or the other to take advantages of high interest rates or stock market growth. Balanced funds generally have low volatility and are popular with investors seeking current income with growth potential. Growth and income funds are similar to balanced funds. However, they rely more on growth stocks that pay dividends.