Every mutual fund has a stated investment objective. Disclosure of the investment objective is required by the SEC, and is used to classify a mutual fund into one of several categories

Briefly explain the investment objective of each of the following categories.
(a) growth funds
(b) aggressive growth funds
(c) equity-income funds
(d) balanced funds
What will be an ideal response?

Answer:
(a) Growth funds seek capital appreciation through long-term growth and capital gains. They offer little, if any, current income.
(b) Aggressive growth funds seek capital gains and are considered speculative in nature.
(c) Equity-income funds seek current income by investing in high-yielding common stocks. Capital preservation is a secondary objective.
(d) Balanced funds hold a portfolio of both stocks and bonds for the purpose of generating both current income and long-term capital gains.