At some point, we all look a little deeper into our investment accounts and wonder what it all means. From commercial real estate funds and index funds to blue chip stocks and bonds, it all gets complicated, especially if you’re short on time. But with enough research you’ll find there are options for everyone. One option to consider are blended growth and income funds. Income funds are great for their steady stream of payments set at regular intervals, which lends itself to reliable passive income and low risk relative to their growth oriented cousins.
The American Funds Growth and Income Fund is one such option and worth every bit of your consideration if you’re looking for a great passive income option that blends with great growth as well.
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Income funds are the perfect passive income option for those who have money socked away. The more capital you have, the more potential to make money on it, but income funds work well for passive investors as they provide income at specific intervals and can be very reliable options for accumulation of capital as they have a quick return. Income funds are unique in that they provide dividends at regular intervals.
Income funds work in a variety of ways, come in all formats and tend to be private funds, mutual funds, or exchange-traded funds. They’re ideal for passive income and avoid lump-sum capital gains and appreciation.
Growth funds tend to be more aggressive and focus on capital appreciation without dividends. These funds are diversified and invest heavily in above-average growth companies that reinvest earnings in expansions and research and development. This leads to immense growth opportunities but also results in higher-than-average risk.
These funds are less suitable for those retiring soon as the risk of losing money can be higher. There also tends to be a higher holding period for these funds.
Not a fund for the faint of heart.
That said, growth funds have their place in many portfolios, especially those looking to accumulate capital more quickly.
There is an option that blends the features of income funds with that of growth funds. The income and growth funds are a true hybrid and provide great capital accumulation and monthly income. The American Funds Growth And Income Fund is one such example.
The American Funds Growth Income Fund Portfolio is a blended fund that strikes a balance between providing long-term growth and current income. Using a similar mix of companies as the income-only and growth-only funds provides large cap opportunity on a more balanced basis. The fund invests in underlying funds that provide exposure to growth-oriented common stock, while all income is flowed through from dividend earning stocks that the fund invests in.
Morningstar rates the American Funds Growth Income Fund Portfolio with four stars for 3-year, 5-year and overall time periods. Morningstar also notes that the fund has below average risk and above average return for all three time frames mentioned. This fund could be a great option for those looking to diversify and accumulate capital while earning regular income on their money invested.
Morningstar gives the Income Fund Of America three stars out of five and cites that the risk is low and return is below average for 3-year, and 5-year time periods. The return bumps up to average for 10 year and overall, meaning the American income fund has middling performance overall. It’s lower expense ratio might make for some of the lower returns, but overall, this fund might not be the best choice for investors as of this writing.
The American Funds Growth Income Fund may be a good alternative that provides growth of capital in addition to dividend payouts.
This fund is a large cap growth fund that seeks the growth of capital. The fund invests primarily in common stock and target companies with superior opportunities for growth of capital. While the fund focuses on American companies, up to 25% of assets may be allocated in the securities of issuers outside of the United States.
There’s no easy answer for this one as it all depends. If you have substantial capital to invest and would like to make passive income on the money, an income fund might be a better fit for you. If you’re looking to grow your capital to get to a point where you can earn passive income, a growth fund might be a better fit for you. If you’re unsure on which you’d prefer, a blended income and growth fund will provide capital appreciation and the monthly income you need. The best practice is to consult your financial professional and think about your goals and how much risk you’re willing to take to meet them. Not every fund is a good fit and there’s risk in trading on any financial market.
While Income and Growth funds each have their benefits, commercial real estate investing is another great option to consider and there are many ways to get started.
American Funds provide great large cap opportunities that invest heavily in American companies. Your goals determine which might be the better fit for you but the American Funds Growth Income Fund is a great, middle-of-the-road option that blends the benefits of growth and income funds. Whether you’re looking to grow your capital, or take advantage of monthly or quarterly income, this fund could be the one for you.
When you’re ready to dive into a growth and income fund investing, get professional guidance for your investment decisions from the experts in financial services — Saint Investment Group. Contact our team today for a free consultation and discover the ways you can make your money work for you.
Investing in a growth fund offers the possibility for long-term wealth appreciation and the chance to participate in the stock market's growth.In addition, growth funds offer diversity and the chance to invest in a broad variety of firms and industries.
Investing in an income fund can provide a reliable source of income and potential for capital appreciation. It also offers diversification and stability to a portfolio. However, it's important to consider the risks involved such as interest rate risk and credit risk.
Investing in a growth fund involves higher risk as it primarily invests in stocks that can be volatile. There is also a potential for underperformance during declining market conditions.
Investing in an income fund carries risks including interest rate risk, credit risk, reinvestment risk, and market risk.
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.
