What Types Of Funds Deserve Your Money?

by David Jenyns on October 13, 2008

As a result of the division of investment companies into those whose prime object is income and those that stress capital gains, investors have perplexing problems of choice. “Growth funds” have become the popular designation of those whose policy emphasizes investment in stocks promising the greatest capital appreciation.

Income is secondary. The market may alter its valuation of income. Recently, it has been preferable to own “growth” rather than “income” funds. The difference in income, i.e. income derived from dividends, has been more than compensated for by the rise in stock prices, and this, in turn, has been reflected in the relatively faster rise in the net asset value of the shares of growth funds.

Investors still must learn the difference between economic growth and rising stock prices due to the raising of expectations and special factors.

In the end, the great unknown is the long-term growth of stock prices. Superimposed on economic analysis, if the projections are assumed to be correct, are the evaluations placed by investors on income and dividends.

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