Stock mutual funds (a.k.a. equity funds) are some of the most versatile in the financial world. For starters, they are mutual funds that invest only in stocks. Given the risky nature of stocks, stock mutual funds usually carry more risk than money market or bond funds. On the plus side, stock mutual funds come with excellent potential returns. Over the course of history, stock mutual funds have been better performers than bond and cash investments.

Stock funds vary in name and strength. Many hold different management styles and represent different types of invested companies. Two types of stock mutual funds: growth and value - are the most notable. Growth funds pay attention to investments with long term capital appreciation potential. Investments under it go towards companies with steady revenue increases and earnings rather than “day trade style” companies with quick profits. Growth funds are less stable than other kinds of funds, although they perform better in bull markets.

The second type of stock mutual fund, value funds, are investments towards companies considered to be good bargains.  They are usually assigned to companies that have stopped growth and use their earnings to pay its stockholders. Dividends are paid with current income more than short term growth income and are usually stocks that have experienced a downward turn in number of investors or a slight depression. Whether its growth or value, stock mutual funds can pay tremendous dividends with perseverance and a little savvy to boot.