Are you searching for ways to grow your wealth and generate income simultaneously? Look no further! In this article, we’ll introduce you to the best mutual funds for growth and income across seven categories in 2024, providing you with a comprehensive guide to different types of mutual funds.
What Are Growth and Income Mutual Funds?
Growth and income mutual funds are a special type of investment vehicle that aims to offer both capital appreciation and current income to investors. These funds typically diversify their holdings by investing in a combination of stocks and bonds, providing a balanced approach to investment.
Why Choose Growth and Income Mutual Funds?
Investing in growth and income mutual funds can be a smart strategy for individuals who desire long-term wealth growth while receiving regular income. These funds are particularly appealing to conservative investors seeking a more balanced and stable investment approach.
How to Select the Best Growth and Income Mutual Funds
When it comes to choosing the ideal growth and income mutual funds for your portfolio, consider the following factors:
Investment Goals: First, clarify your investment goals. Determine whether your primary objective is long-term wealth growth or generating income in the short term.
Risk Tolerance: Assess your risk tolerance level. Growth and income mutual funds generally suit investors with a moderate risk tolerance, striking a balance between growth potential and income stability.
Time Horizon: Evaluate your investment time horizon. Growth and income mutual funds are particularly suitable for long-term investors who are willing to stay invested for an extended period.
Investment Style: Decide whether you prefer an active or passive investment approach. Growth and income mutual funds cater to investors who lean towards a more passive investment style, delegating the decision-making to fund managers.
Key Factors to Consider About Growth and Income Mutual Funds
Investment Objective: Understand the fund’s investment objective and determine if it aligns with your investment goals. This will help ensure the fund is well-suited to meet your specific needs.
Performance: Analyse the fund’s performance over the past few years. Look for consistent and competitive returns that reflect the fund’s ability to deliver both growth and income.
Expense Ratio: Consider the fund’s expense ratio, which represents the fees and expenses charged by the fund. Lower expense ratios are generally more favorable, as they can have a positive impact on your overall returns.
Management Team: Research the fund’s management team. A skilled and experienced team with a proven track record can significantly contribute to the fund’s success.
What Are The Different Categories of Growth And Income Mutual Funds?
The best mutual funds for growth and income can be categorised as follows:
- Large-cap funds
- Mid-cap funds
- Small-cap funds
- International funds
- Dividend funds
- Bond funds
- Hybrid funds
Let’s start by learning what makes each of these seven groups of mutual funds unique. Then you’ll know which group is appropriate for you based on your risk tolerance and long-term goals.
What Are Large-Cap Funds?
Large-cap funds invest in the stocks of large companies. These companies are typically well-established and have a long history of profitability. Large-cap funds tend to be less volatile than other types of funds, but they also tend to offer lower potential returns.
Characteristics of Large Cap Mutual Funds:
- Investment objective: To provide long-term capital appreciation by investing in the stocks of large companies.
- Risk profile: Low to moderate risk.
- Potential returns: Lower potential returns than other types of funds, but also lower risk.
- Suitability: Investors who are looking for a long-term investment with the potential for moderate growth
Types of Large-Cap Mutual Funds:
- Growth funds: These funds invest in large companies that are expected to grow at a faster rate than the market average.
- Value funds: These funds invest in large companies that are trading at a discount to their intrinsic value.
- Index funds: These funds track a specific market index, such as the S&P 500.
What Are Mid-Cap Cap Funds?
Mid-cap funds invest in the stocks of mid-sized companies. These companies are typically growing more rapidly than large companies, but they also tend to be more volatile. Mid-cap funds offer the potential for higher returns than large-cap funds, but they also carry more risk.
Characteristics of Mid-Cap Mutual Funds:
- Investment objective: To provide long-term capital appreciation by investing in the stocks of mid-sized companies.
- Risk profile: moderate to high risk.
- Potential returns: Higher potential returns than large-cap funds, but also higher risk.
- Suitability: Investors who are looking for a long-term investment with the potential for higher growth
Types of Mid-Cap Mutual Funds:
- Growth funds: These funds invest in mid-sized companies that are expected to grow at a faster rate than the market average.
- Value funds: These funds invest in mid-sized companies that are trading at a discount to their intrinsic value.
- Index funds: These funds track a specific market index, such as the Russell 2000.
What Are Small-Cap Cap Funds?
Small-cap funds invest in the stocks of small companies. These companies are typically the most volatile, but they also offer the potential for the highest returns. Small-cap funds are a good option for investors who are willing to take on more risk in exchange for the potential for higher returns.
Characteristics of Small Cap Mutual Funds:
- Risk profile: High risk.
- Investment objective: To provide long-term capital appreciation by investing in the stocks of small companies.
- Potential returns: The potential for the highest returns but also the highest risk
- Suitability: Investors who are willing to take on more risk in exchange for the potential for higher returns
Types of Small-Cap Mutual Funds:
- Growth funds: These funds invest in small companies that are expected to grow at a faster rate than the market average.
- Value funds: These funds invest in small companies that are trading at a discount to their intrinsic value.
Index funds: These funds track a specific market index, such as the Russell 2000.
What are International Mutual Funds?
International funds invest in the stocks of companies outside of the United States. International funds offer diversification benefits, as they can help reduce your risk by investing in companies that are not directly correlated with the U.S. stock market.
Characteristics of International Mutual Funds:
- Investment objective: To provide long-term capital appreciation by investing in the stocks of companies from outside of the United States.
- Risk profile: Moderate to high risk.
- Potential returns: The potential for higher returns than U.S. funds but also higher risk
- Suitability: Investors who are looking for diversification benefits and the potential for higher returns
Types of International Funds:
- Developed market funds: These funds invest in the stocks of companies from developed countries, such as the United States, Europe, and Japan.
- Emerging market funds: These funds invest in the stocks of companies from emerging markets, such as China, India, and Brazil.
- Index funds: These funds track a specific market index, such as the MSCI EAFE or the MSCI Emerging Markets Index.
What Are Dividend Mutual Funds?
Dividend funds invest in companies that pay high dividends. These funds can provide a steady stream of income, and they can also be a good way to grow your wealth over the long term.
Characteristics of Dividend Funds:
- Investment objective: To provide a steady stream of income by investing in the stocks of companies that pay high dividends.
- Risk profile: Low to moderate risk.
- Potential returns: Lower potential returns than other types of funds, but also lower risk.
- Suitability: Investors who are looking for a steady stream of income and who are willing to accept some risk
There are two main types of dividend funds:
- Dividend growth funds: These funds invest in companies that have a history of growing their dividends.
- Dividend income funds: These funds invest in a variety of companies, regardless of their dividend history.
Dividend funds can be a good option for investors who are looking for a steady stream of income. They can also be a good way to grow your wealth over the long term, as the dividends can be reinvested to buy more shares of the fund
What Are Bond Mutual Funds?
Bond funds invest in bonds, which are loans that are issued by governments or corporations. Bonds are considered a more conservative investment than stocks, and they can provide a steady stream of income.
Characteristics of Bond Funds:
- Investment objective: To provide a steady stream of income by investing in bonds.
- Risk profile: Moderate to low risk.
- Potential returns: Lower potential returns than stocks, but also lower risk.
- Suitability: Investors who are looking for a steady stream of income and who are not willing to accept as much risk as stocks
Types of bond funds:
- Government bond funds: These funds invest in bonds that are issued by governments.
- Corporate bond funds: These funds invest in bonds that are issued by corporations.
Bond funds can be a good option for investors who are looking for a more conservative investment approach. They can also be a good way to reduce your risk, as bonds are less volatile than stocks.
What Are Hybrid Mutual Funds?
Hybrid funds are a mix of stocks and bonds. These funds can provide a balance of growth and income, and they can be a good option for investors who are looking for a more conservative investment approach.
Characteristics of Hybrid Funds:
- Investment objective: To provide a balance of growth and income by investing in a mix of stocks and bonds.
- Risk profile: Moderate risk.
- Potential returns: The potential for higher returns than bond funds but also higher risk
- Suitability: Investors who are looking for a balance of growth and income and who are willing to accept some risk
Types of hybrid funds:
- Balanced funds: These funds invest in a mix of stocks and bonds, with a roughly equal weighting.
- Income funds: These funds invest in a mix of stocks and bonds, with a greater weighting towards bonds.
Hybrid funds can be a good option for investors who are looking for a balanced approach to investing. They can provide a steady stream of income, and they can also help grow your wealth over the long term.
Now, let’s look at some of the best growth and income mutual funds for 2023 in each category that have given one of the highest returns in last five years average returns per year.
Best Large-Cap Mutual Funds to Invest in 2023
Vanguard Information Technology Index Fund (VGT): This fund tracks the performance of the MSCI US Broad Market Growth Index, which is a broad index of large-cap growth stocks.
VGT has a low expense ratio of 0.10% and has returned an average of 19.39% per year over the past 5 years.
Schwab U.S. Large-Cap Growth Index Fund (SWLGX): This fund generally invests in stocks that are included in the Russell 1000.
SWLGX has a low expense ratio of 0.03% and has returned an average of 14.19% per year over the past 5 years.
Fidelity Growth Company Fund (FGFAX): This fund is an actively managed large-cap growth fund that has a long history of providing strong returns.
FGFAX has an expense ratio of 0.79% and has returned an average of 15.81% per year over the past 5 years. (Source : Yahoo finance )
Best Mid-Cap Mutual Funds to Invest in 2023
Vanguard Mid-Cap Growth Index Fund (VOT): This fund tracks the performance of the MSCI US Mid-Cap Growth Index, which is a broad index of mid-cap growth stocks.
VOT has a low expense ratio of 0.07% and has returned an average of 8.33% per year over the past 5 years.
iShares Russell Mid-Cap Growth ETF (IWP): This ETF tracks the performance of the Russell Mid-Cap Growth Index, which is a market-cap-weighted index of mid-cap growth stocks.
IWP has a low expense ratio of 0.23% and has returned an average of 8.17% per year over the past 5 years.
Rowe Price Mid-Cap Growth Fund (RPMGX): This fund is a actively managed mid-cap growth fund that has a long history of providing strong returns.
RPMGX has an expense ratio of 1.29% and has returned an average of 7.81% per year over the past 5 years.
Best Small-Cap Mutual Funds
Vanguard Small-Cap Growth Index Fund (VSGI): This fund tracks the performance of the MSCI US Small Cap Growth Index, which is a broad index of small-cap growth stocks.
VSGI has a low expense ratio of 0.07% and has returned an average of 4.79% per year over the past 5 years.
Optimum Small-Mid Cap Growth Fund (OASGX): This fund is an actively managed small-cap growth fund that has a long history of providing strong returns.
OASGX has an expense ratio of 2.29% and has returned an average of 7.45% per year over the past 5 years.
Best International Mutual Funds
Vanguard Total International Stock Index Fund (VTI): This fund tracks the performance of the FTSE Global All Cap Index, which is a market-cap-weighted index of stocks from developed and emerging markets.
VTI has a low expense ratio of 0.03% and has returned an average of 10.42% per year.
iShares Core MSCI EAFE ETF (IEFA): This ETF tracks the performance of the MSCI EAFE Index, which is a market-cap-weighted index of stocks from developed markets outside of the United States.
IEFA has a low expense ratio of 0.07% and has returned an average of 3.61% per year over the past 5 years.
Vanguard FTSE Emerging Markets ETF (VEA): This ETF tracks the performance of the FTSE Emerging Markets Index, which is a market-cap-weighted index of stocks from emerging markets.
VEA has a low expense ratio of 0.05% and has returned an average of 3.77% per year over the past 5 years.
Best Dividend Mutual Funds
Vanguard Dividend Appreciation ETF (VIG): This ETF tracks the performance of the Dividend Achievers Select Index, which is a market-cap-weighted index of U.S. stocks that have a history of increasing their dividends.
VIG has a low expense ratio of 0.06% and has returned an average of 11.06% per year over the past 5 years.
Schwab US Dividend Equity ETF (SCHD): This ETF tracks the performance of the Schwab U.S. Dividend Equity Index, which is a market-cap-weighted index of U.S. stocks that have a history of paying high dividends.
SCHD has a low expense ratio of 0.06% and has returned an average of 10.87% per year over the past 5 years.
Best Bond Mutual Funds
Vanguard Total Bond Market ETF (BND): This ETF tracks the performance of the Bloomberg Barclays US Aggregate Bond Index, which is a broad index of U.S. bonds.
BND has a low expense ratio of 0.03% and has returned an average of 0.91% per year over the past 5 years.
iShares Core U.S. Aggregate Bond ETF (AGG): This ETF tracks the performance of the Bloomberg Barclays US Aggregate Bond Index, which is a broad index of U.S. bonds.
AGG has a low expense ratio of 0.03% and has returned an average of 0.85% per year over the past 5 years.
Schwab Intermediate-Term Corporate Bond ETF (SCHR): This ETF tracks the performance of the Schwab Intermediate-Term Corporate Bond Index, which is a market-cap-weighted index of U.S. corporate bonds with maturities of 5 to 10 years.
SCHR has a low expense ratio of 0.03% and has returned an average of 0.87% per year over the past 5 years.
Best Hybrid Mutual Funds
Vanguard Balanced Index Fund (VBTLX): This fund is a balanced fund that invests in a mix of stocks and bonds. VBTLX has a low expense ratio of 0.03% and has returned an average of 0.89% per year over the past 5 years.
iShares Balanced Fund (IUSB): This fund is a balanced fund that invests in a mix of stocks and bonds. IUSB has a low expense ratio of 0.06% and has returned an average of 1.03% per year over the past 5 years.
Conclusion
In the above article we have discussed about the best mutual funds for growth and income for 2024. Mutual funds provide a versatile and accessible avenue for investors to achieve their financial goals.
Whether you seek stability and moderate growth through large-cap mutual funds, higher returns with increased risk in mid-cap mutual funds and small-cap mutual funds, or diversification in international funds, there are options to suit every investor.
Disclaimer : All data provided above is provided for informational purposes only, and is not intended for trading or investing purposes. You must consult an expert financial advisor to invest in any mutual fund.
I am a passionate blogger and founder of WealthJacks.com. My journey includes hands-on experience in finance, investing, and online marketing. I have a great passion and desire to help you empower and attain financial independence through straightforward tips and practical methods to grow your wealth.