However, if you can accept modest price fluctuations, short-term bond funds should provide a higher income return and the potential for a higher overall return. If your main objective is a reasonable level of monthly income, you should emphasize investments in bond or fixed-income funds. Higher income usually accompanies longer maturities, and the longer a bond fund's maturity, the higher the risk in the form of greater swings in the fund's share price. If you want to keep price swings to a modest level, consider a bond fund with a weighted average maturity under five years and high overall credit quality. But if you can tolerate price changes in exchange for higher income, choose a longer-term fund or perhaps one with lower average credit quality.
Growth means growth of capital.
Stocks represent ownership of a company, so if the company prospers, its stock price should rise. While stocks have greater potential market risk, they also have the lowest inflation risk and offer the highest potential for growth over time. Stock funds come in every imaginable variety. Likewise, funds that invest across a wide variety of industries should be less volatile than ones in a narrow sector, such as technology or energy. If you expect to invest in several stock funds, consider diversifying overseas.