Growth and Income Funds

A growth and income fund is generally lower in risk than a growth fund. Such a fund invests in companies that have good growth potential but also pay dividends to their investors.
The fact that the fund profits in at least two ways from its investments cushions volatility, making it more of an “allweather” fund than the more uncertain growth fund. This type of fund is less volatile because the dividends keep coming even if the stock price goes down.
In most cases, stock dividends represent a relatively minor portion of the profits you make from a mutual fund. In a recent year, for example, stocks listed in the S&P 500 Index paid an average dividend of about 1.3%. (Thus, if you owned a share of stock priced at $75 which paid the average dividend, you’d receive, in the course of the year, checks totaling $0.97 per share — not a huge sum by any standard.) On the other hand, the average dividend yield from an aggressive growth fund in the same year was just 0.2%. Obviously, if the security of knowing that dividends are rolling in is important to you, stay with a growth and income fund rather than seeking aggressive growth.