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Funds in Value Line’s Growth/Income objective group place equal emphasis on capital growth and current income, or growth of income, mainly through investments in common stocks. Although this balanced description may seem like a fine line of distinction from a fund that seeks capital appreciation with a secondary objective of income, or a fund that seeks income with a secondary objective of capital growth, it indicates an important difference. Funds in the Growth objective group and the Income objective group both have specific first-tier goals—Growth/Income funds, meanwhile, are, in some ways, the midpoint between the other two. 

That said, the Growth & Income objective group covers a broad range of funds, and there is no particular naming convention that one can point to that differentiates these funds from those that reside in the Growth or Income objectives. Value, however, is a frequent inclusion in names of funds here. 

Options range from focus funds, which hold only a small number of stocks, to broadly diversified funds. There are funds that take a growth-oriented approach and those that zero in on value investments. Size is another factor that often comes into play, with funds available that tend to focus on select areas of the market-cap spectrum. Note, however, that small-cap and mid-cap funds tend to reside in the Small Cap objective group.

There are also some thematic funds in this objective group; for example several socially responsible funds make an appearance here. In the end, there are a large number of options in the Growth/Income objective group, so investors need to ensure that they take the time to fully understand what the funds they are examining actually do to achieve their stated goals.

Over the long term, the Growth/Income objective group has been a stronger performer relative to the broader market, as measured by S&P 500 Index. For the 10-year period ended December 31, 2011, the group had an annualized gain of 2.8%, while the S&P 500 Index also reported a gain of 2.9%. For five years and three years, the group had an annualized loss of 1.0% and a gain of 12.6%, respectively, while the Index reported a loss of 0.4% and a gain of 14.0%, respectively. During the one-year period ended December 31, 2011, the Growth/Income objective group reported a negative return of 0.6%, compared with a positive return of 2.1% for the S&P. The group has an average Risk Rank of 3, indicating that funds in this group might appeal to most investors.

Year to date through December 31, 2011, the Growth/Income objective group has not performed as well as the broader market, underperforming the S&P 500 Index over that span. It reported a loss of 0.6% versus a gain of 2.1% for the Index.

One fund with a relatively high return in 2011 was SunAmerica Focused Dividend Strategy (FDSAX). Last year, the managers achieved a total return of 12.1%, which compares favorably to the S&P 500 Total Return Index’s 10.0%. A $10,000 investment in this fund during December of 2000 would have nearly doubled by the end of 2011, which compares favorably with an approximate 17% return for its benchmark index.

The fund uses a computer-driven, quantitative process to select 30 high dividend-paying stocks, often from the Dow Jones Industrial Average. The companies it chooses to invest in must also score well on its proprietary valuation and profitability formulas. Managers employ a “buy and hold” strategy where annual portfolio selection and reconstitution help minimize portfolio turnover and maximize tax efficiency. 

Another fund that had a very good return in 2011was Commerce Value Fund (CFVLX). The investment objective of the fund is to seek capital appreciation, and secondarily, current income.

Using quantitative and fundamental analysis, the fund invests in a diversified selection of equities that boast favorable value relative to their current price. Under normal market conditions, the fund invests at least 65% of its total assets in stocks, primarily common stocks. As of September 30, 2011 The Commerce Value Fund’s top ten holdings consisted of five Dow-30 components. The funds more conservative strategy has allowed it to outperform the world markets of late. Indeed, its large positions in energy and tobacco stocks supported its relative 2.1% outperformance in 2011.

The fund utilizes a diversified portfolio with value characteristics (low price/book and price/earnings ratios) to achieve capital appreciation and current income. The fund generally purchases common stocks of companies whose characteristics are comparable to those included in the Russell 1000® Value Index.

A third fund with a very good return in calendar 2011 was Vanguard Dividend Growth Fund (KNVIX). In that one year timeframe, The Dividend Growth Fund’s average annual return was 9.4% compared to its benchmark’s (Dividend Growth Spliced Index) return of 6.0%. The benchmark index measures the investment return of common stocks of companies that have a record of increasing dividends over time. Since its inception on May 15, 1992, the fund’s return has surpassed that of its index by 1.06%, each year, on average.

The fund is designed to provide investors with income, while offering exposure to dividend-focused companies across all industries. It focuses on companies with healthy balance sheets and solid cash flows. Furthermore, it considers whether management and board members have demonstrated motivation to give back money to shareholders through dividend distributions. It also looks for companies that will be able to expand their dividend payouts over time.

The fund does have some risks though, the primary one being that returns from high dividend-paying stocks regularly trail returns from the overall stock market during bullish periods. Considering the fund’s lack of sector focus, another risk is broad market volatility.

In the table below, we have listed 10 top-performing funds through December 31, 2011 that we follow in our Fund Advisor database.

 

10 Top Growth/Income Funds Performance

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3

Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

Payden Value Leaders Fund

PYVLX 

14.36

3.55

12.24

 

6.31

-1.48

 

Copley Fund

COPLX 

12.96

3.37

9.13

6.12

-1.41

ING Corporate leaders Trust Fund B

LEXCX 

12.24

2.74

17.12

0.77

3.65

SunAmerica Focused Dividend Strategy Fund A

FDSAX 

12.09

3.62

12.68

2.54

5.34

Commerce Value Fund

CFVLX 

11.24

3.61

13.65

1.85

-1.05

Dreyfus Equity Income A

DQIAX 

10.23

2.68

10.71

1.76

0.88

Vanguard Dividend Growth Fund

VDIGX 

9.43

1.81

11.91

1.15

3.40

Catalyst/Groesbeck Growth of Income A

CGGAX 

9.23

1.41

11.56

-0.78

 

Delaware Value Fund A

DDVAX 

8.97

2.42

14.29

-0.57

-0.79

Rochdale Dividend & Income Fund

RIMHX 

9.01

2.07

9.41

1.63

3.32

Growth/Income Objective Group

 

-0.58

0.64

11.13

-5.80

-1.04

 

 

 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.