These funds specialize in high- yielding stocks and bonds. Income funds usually emphasize common stocks, favoring those that pay dividends. In declining markets, growth and income funds may show a somewhat higher degree of price stability than funds oriented toward capital gains. However, they may also advance at a slower rate in a rising market. A dual purpose mutual fund invests equal dollar amounts in each of two types of shares, income and capital.
Income shares are redeemable at a stated time and price.
Income shareholders do not receive any part of the fund's capital growth. Capital shareholders, on the other hand, receive no periodic income, but are entitled to all the company's assets after the company terminates and the income shareholders have been reimbursed. Bond funds invest only in debt instruments, usually either corporate bonds or government bonds. Due to the relatively stable returns of these investments as a portfolio base, these funds are generally exposed to less risk than others. Since risk is commensurate with the potential for gain, these investments are not likely to provide exceptional income or gain.