Q:

How does the Growth Fund of America affect our economy?

A:

Quick Answer

The Growth Fund of America helps grow the U.S. economy by investing its members' money in many leading American companies. However, the primary aim of the Growth Fund of America, like all mutual funds, is not to improve the economy itself but to generate profit for its investors.

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Full Answer

A mutual fund is any financial instrument that consists of some combination of stocks, other funds, bonds and money market instruments. All mutual funds have a professional management team in charge of buying and selling assets. Most mutual funds focus on a geographical or industrial area. Some mutual funds have a low average rate of return with very little risk, while others have high profit potential but also significant risk of losing money.

The primary advantage of mutual funds versus traditional investments is that they give even small investors access to a diverse portfolio of high-performing financial instruments for a low entry fee. The Growth Fund of America, for instance, owns a large amount of stock in Amazon, a company whose stock is too expensive for the average investor.

While most mutual funds feature a mix of different types of financial instruments, the vast majority of the instruments making up the Growth Fund of America are common stocks. Most of the fund's stocks are issued by American companies, though it also maintains a small amount of non-U.S. stock as well as a small proportion of currency.

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