The distinction between growth funds is, which invest in stocks of companies that have the potential for large capital gains, and value funds, which concentrate on stocks that are undervalued. Value stocks have historically produced higher returns; though, financial theory states this is compensation for their greater risk. Growth funds tend not to pay regular dividends. Income funds tend to be more conservative investments, with a focus on stocks that pay dividends. A balanced fund may use a combination of strategies, usually including some level of investment in bonds, to stay more conservative when it comes to risk, yet aim for some growth.
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