Some preferred stocks and convertible securities are commonly allowed, as are cash equivalents such as Treasury Bills, CDs, and commercial paper. Normally, these established companies will grow at a moderate pace, and will pay regular dividends to owners of its shares. If a mutual fund is the owner, the fund will collect these dividends and pass them to mutual fund shareholders once or more per year. While capital appreciation is the major objective of this type of fund, income derived from dividends is a secondary objective. Investments are typically in long-growth stocks, with a lower portfolio turnover than the aggressive growth funds.
Dividend yields tend to be low.
The usual portfolio is blue chip stocks, with some income enhancing securities like convertible preferred stocks or bonds thrown into the mix. Index - Unlike traditional stock funds, which are managed actively by a portfolio manager based on analysis of economic and market movements, index funds are passively managed. Specific region funds such as Asia-Pacific funds fall in this area. Sector - Concentrates investments on a narrow market sector like health care, Internet stocks, biotechnology, and so on. Sector funds tend to be volatile as industry groups fall into and out of favor, portfolios are diversified only within an industry group.