These funds invest primarily in stocks of corporations that show potential for growth. Growth funds may choose businesses or smaller companies that have the potential to grow quickly. Growth funds often forego paying dividends to their customers because growth companies reinvest their earnings instead of paying them to investors. Read the tutorial on Types of Mutual Funds to learn more. They bring the world of bond investing to the small investor.
Most bond funds are conservative focusing on payment of dividends.
Investors can choose among several types of bond funds. Below are some of the most popular. Municipal bond funds invest in debts issued by state and local governments. Their dividends are free from federal taxes. Government bond funds invest in debts of the U.S. Government and its agencies.