Investing in mutual funds that balance growth and income is a smart strategy for investors who want capital appreciation along with steady dividend payouts. These funds typically invest in a mix of high-growth stocks and dividend-paying companies, offering a hedge against market volatility while providing compounding returns.
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What Are Growth and Income Mutual Funds?
Growth and income mutual funds aim to achieve two primary objectives:
- Capital Appreciation – By investing in high-growth stocks (e.g., tech, healthcare).
- Income Generation – Through dividend-paying stocks (e.g., utilities, REITs, blue-chip companies).
These funds are ideal for investors who want a balanced approach—earning dividends while benefiting from long-term stock price growth.
Key Metrics to Evaluate Growth & Income Funds
Before diving into the best funds, let’s review the key metrics I used to evaluate them:
- Expense Ratio – The annual fee charged by the fund (lower is better).
- Dividend Yield – Annual dividend income as a percentage of the fund’s price.
- 5-Year Annualized Return – Historical performance to gauge consistency.
- Sharpe Ratio – Measures risk-adjusted returns (higher is better).
- Beta – Indicates volatility relative to the market (lower beta = less risk).
10 Best Growth and Income Mutual Funds in 2024
1. Vanguard Dividend Growth Fund (VDIGX)
- Expense Ratio: 0.30%
- Dividend Yield: 1.8%
- 5-Year Annualized Return: 9.2%
- Sharpe Ratio: 0.85**
- Beta: 0.90
Why I Like It: VDIGX focuses on high-quality dividend growers like Johnson & Johnson (JNJ) and Microsoft (MSFT). It has a low expense ratio and a strong track record of outperforming the S&P 500 with lower volatility.
2. Fidelity Equity-Income Fund (FEQIX)
- Expense Ratio: 0.62%
- Dividend Yield: 2.1%
- 5-Year Annualized Return: 8.7%
- Sharpe Ratio: 0.78
- Beta: 0.88
Why I Like It: FEQIX invests in undervalued dividend stocks, including Verizon (VZ) and Exxon Mobil (XOM). It’s a solid choice for income-focused investors.
3. T. Rowe Price Dividend Growth Fund (PRDGX)
- Expense Ratio: 0.64%
- Dividend Yield: 1.5%
- 5-Year Annualized Return: 10.1%
- Sharpe Ratio: 0.91
- Beta: 0.85
Why I Like It: PRDGX has consistently beaten its benchmark by focusing on companies with sustainable dividend growth, such as Apple (AAPL) and Procter & Gamble (PG).
4. American Funds Growth and Income Portfolio (GIFDX)
- Expense Ratio: 0.58%
- Dividend Yield: 1.9%
- 5-Year Annualized Return: 9.8%
- Sharpe Ratio: 0.89
- Beta: 0.92
Why I Like It: GIFDX provides a balanced mix of growth and income, with holdings in Amazon (AMZN) and JPMorgan Chase (JPM).
5. Schwab Dividend Equity Fund (SWDSX)
- Expense Ratio: 0.89%
- Dividend Yield: 2.4%
- 5-Year Annualized Return: 8.3%
- Sharpe Ratio: 0.75
- Beta: 0.87
Why I Like It: SWDSX targets high-dividend stocks like AT&T (T) and Chevron (CVX), making it ideal for retirees seeking income.
6. Vanguard Wellington Fund (VWELX)
- Expense Ratio: 0.24%
- Dividend Yield: 2.3%
- 5-Year Annualized Return: 8.9%
- Sharpe Ratio: 0.82
- Beta: 0.70
Why I Like It: VWELX is one of the oldest balanced funds, with a mix of 60% stocks and 40% bonds. It’s a low-risk option for conservative investors.
7. Fidelity Balanced Fund (FBALX)
- Expense Ratio: 0.51%
- Dividend Yield: 1.7%
- 5-Year Annualized Return: 9.0%
- Sharpe Ratio: 0.80
- Beta: 0.75
Why I Like It: FBALX offers a diversified portfolio with stocks like Alphabet (GOOGL) and bonds for stability.
8. Dodge & Cox Balanced Fund (DODBX)
- Expense Ratio: 0.53%
- Dividend Yield: 2.0%
- 5-Year Annualized Return: 9.5%
- Sharpe Ratio: 0.87
- Beta: 0.80
Why I Like It: DODBX is actively managed with a value-oriented approach, holding stocks like Wells Fargo (WFC) and Comcast (CMCSA).
9. JPMorgan Equity Income Fund (OIEIX)
- Expense Ratio: 0.72%
- Dividend Yield: 2.5%
- 5-Year Annualized Return: 8.5%
- Sharpe Ratio: 0.77
- Beta: 0.85
Why I Like It: OIEIX focuses on high-yield dividend stocks, including Pfizer (PFE) and Coca-Cola (KO).
10. Hartford Dividend and Growth Fund (IHGIX)
- Expense Ratio: 0.92%
- Dividend Yield: 1.6%
- 5-Year Annualized Return: 10.3%
- Sharpe Ratio: 0.93
- Beta: 0.82
Why I Like It: IHGIX has outperformed its peers with holdings in NVIDIA (NVDA) and Mastercard (MA).
Comparison Table: Best Growth & Income Mutual Funds
| Fund Name | Expense Ratio | Dividend Yield | 5-Year Return | Sharpe Ratio | Beta |
|---|---|---|---|---|---|
| VDIGX | 0.30% | 1.8% | 9.2% | 0.85 | 0.90 |
| FEQIX | 0.62% | 2.1% | 8.7% | 0.78 | 0.88 |
| PRDGX | 0.64% | 1.5% | 10.1% | 0.91 | 0.85 |
| GIFDX | 0.58% | 1.9% | 9.8% | 0.89 | 0.92 |
| SWDSX | 0.89% | 2.4% | 8.3% | 0.75 | 0.87 |
| VWELX | 0.24% | 2.3% | 8.9% | 0.82 | 0.70 |
| FBALX | 0.51% | 1.7% | 9.0% | 0.80 | 0.75 |
| DODBX | 0.53% | 2.0% | 9.5% | 0.87 | 0.80 |
| OIEIX | 0.72% | 2.5% | 8.5% | 0.77 | 0.85 |
| IHGIX | 0.92% | 1.6% | 10.3% | 0.93 | 0.82 |
How to Choose the Right Fund for You
- Risk Tolerance – If you prefer stability, VWELX or FBALX are great choices.
- Dividend Focus – For higher yields, consider SWDSX or OIEIX.
- Growth Potential – PRDGX and IHGIX offer strong capital appreciation.
Final Thoughts
The best growth and income mutual funds provide a balance between dividend income and capital growth. My top pick is Vanguard Dividend Growth (VDIGX) due to its low fees and strong performance. However, if you seek higher dividends, Schwab Dividend Equity (SWDSX) is a solid alternative.
By diversifying across these funds, you can build a resilient portfolio that generates income while growing your wealth over time.
