If you want to keep price swings to a modest level, consider a bond fund with a weighted average maturity under five years and high overall credit quality. But if you can tolerate price changes in exchange for higher income, choose a longer-term fund or perhaps one with lower average credit quality. Growth means growth of capital. Stocks represent ownership of a company, so if the company prospers, its stock price should rise. While stocks have greater 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 in a narrow sector, such as technology or energy. If you expect to invest in several stock funds, consider diversifying overseas. Since international stock prices do not usually move in concert with U.S. stocks over the long term, they can help smooth out the ups and downs of your domestic stock holdings and increase the potential for higher returns over time. However, you must be willing to tolerate greater risk in order to pursue potentially greater long-term growth of capital. The Importance of Diversification.