A well-diversified mutual fund significantly reduces the risk of losing money if one particular stock or bond underperforms. In fact, the average investor would have a difficult time putting together a portfolio as balanced and diversified as that of a mutual fund. Bear in mind however, that investment return and principal value of mutual funds will fluctuate due to market conditions so that shares, when redeemed, may be worth more or less than their original cost. There may be little current income to investors, however. Growth Funds , like their aggressive cousins, look for capital appreciation, but are considered less risky due to investment in well-seasoned companies that also pay dividends.
Income remains a secondary consideration.
Growth and Income Funds invest in well-seasoned blue chip companies with track records of paying dividends. These funds may be less risky than their growth-oriented counterparts because they invest in larger capitalized companies that have the cash flow to pay shareholder dividends. Balanced Funds focus on preserving principal. They invest in a mixed portfolio with fixed portions of common stocks, preferred stocks and bonds. Income Funds seek a high level of current income for shareholders by investing in common stocks that pay high dividends, as well as in government and corporate bonds.