Lastly, you may wish to consider whether you would benefit from tax-exempt bond funds. Income earned on municipal bonds issued by state and local governments is not subject to federal income taxes and may also be exempt from state and local income taxes in the state of issuance. Growth means growth of capital. Stocks represent ownership of a company, so if the company prospers, its stock price should rise. While stocks have the greatest 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 investing in a narrow sector, such as technology or energy. If you expect to invest in several stock funds, consider diversifying overseas. Since international stocks do not usually move in concert with U.S. stocks, they can help smooth out the ups and downs of your stock holdings and increase the potential for higher long-term returns. As always, however, the greater risk you are willing to tolerate, the potentially greater your long-term growth of capital. Several types of mutual funds offer programs that allow you to accomplish more than one investment goal in a single investment.