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What are the benifit to growth funds?


I had to chose mutual funds and two of them are growth funds and growth/income we are suposed to say why these are good choices

A growth fund is a fund where the assets within the fund are diversified in such a fashion as to maximize (as best as the Fund Manager can) on capital appreciation; which generally entails having companies within the Portfolio that DO NOT issue dividends.
A growth/income fund is similar to the growth, but the portfolio of stocks will include companies (usually Large Cap) that are poised for strong growth AND also issue dividends (the income aspect).
The important point to note is the presence of dividends. A dividend is considered a bad thing if your sole obective is strong aggressive growth. Reason being, the money the Company is giving to its Shareholders could be better spent on growing the company (the opportunity cost of capital): by paying off debts, modernizing, etc. A dividend is also a tax burden on the Shareholder, as it is taxed as Income come tax season, regardless of whether it goes to your bank account or stays within your mutual fund.
Without seeing your choices I would say that growth funds are valuable because they focus on strong growth without the tax risks (capital gains, interest payment, dividend payouts). This means that the money invested within these companies is being efficiently applied, which will recipricate itself into your portfolio. Generally, these type of funds are the top performing funds, which means for the individual investor, their investment is yielding very positive returns for their money.

In short, growth funds select stocks that pursue long-term income. Whereas income stock sees income sooner.

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