Because these companies are not as financially strong as other corporations or the U.S. government, high-yield funds are generally riskier that other bond funds. But if you are willing to accept the risk, you may increase the potential for earning a higher rate of interest on your investment. Page Menu Tax-Exempt Bond Funds invest in bonds issued by states and municipalities, and the income they pay out is free form federal taxes. Some tax-exempt funds specialize in bonds issued within one state and, for residents of that state, the fund s income is also free from state and local taxes. In a rising stock market, you can expect growth in the value of your investment.
Income funds derive a large portion of their income from bonds.
Generally, at least half of their portfolio is invested in bonds. Page Menu Growth Funds invest almost entirely in stocks, typically those of established companies. The goal of these funds is to make the value of your investment appreciate over time, though they may pay a small amount of income from dividends. Page Menu Aggressive Growth Funds typically invest in the stocks of small, rapidly growing companies. The funds focus on growth and pay little or no dividends.