In general, stock funds deliver greater returns over the long term than bond funds. But stock funds are less predictable and more likely to deliver sharp losses as well as gains over relatively short spans of time, leaving short-term investors unsure of how much they'll have when they need their money.
Stock funds rely on their holdings to rise in value in order to deliver good returns.
Bond funds achieve much of their return by collecting interest on the securities they own. Within each of these broad groupings exist several fund categories. Dividend income is tiny or nonexistent. One step down on the volatility meter, this category features funds that invest in larger, steadily growing companies. Intel and Microsoft are examples of fund holdings in this category.