Australian investors have long debated whether to chase high-flying growth stocks or stick with the reliable comfort of income-paying assets. In 2025, growth and income funds are gaining attention for their promise to deliver the best of both worlds: capital gains and a regular stream of income. But are they really the golden ticket for building wealth in a changing economic climate?

Understanding Growth and Income Funds: The Hybrid Approach

Growth and income funds are professionally managed portfolios that blend two objectives: earning capital appreciation (growth) and generating income (typically through dividends or interest). Instead of choosing between high-growth shares and steady dividend-payers, these funds invest in a diversified mix, aiming to deliver a balanced return profile.

Growth Assets: Australian and international shares with strong long-term growth potential.
Income Assets: Dividend-paying stocks, real estate investment trusts (REITs), bonds, and infrastructure investments.

In 2025, many Australian fund managers have adjusted their strategies to reflect ongoing market volatility, the Reserve Bank’s cautious approach to interest rates, and renewed demand for reliable income streams in an uncertain economic landscape.

Why Growth and Income Funds Are Trending in 2025

Several trends are driving renewed interest in these funds:

Rising Cost of Living: With inflation still hovering above the RBA’s 2–3% target, Australians are hungry for investments that can outpace rising costs but also provide cash flow for everyday expenses.
Superannuation Strategies: As more Australians approach retirement, there’s a growing need for investments that can both grow their nest eggs and generate a reliable income stream—especially in the post-retirement phase.
Market Volatility: After a turbulent few years on global markets, many investors are wary of putting all their eggs in the growth basket. Funds that combine growth and income offer a diversified approach that can help cushion the impact of market swings.

According to APRA’s 2025 superannuation performance data, diversified funds with a growth/income blend have delivered more stable returns over the past three years compared to pure equity or fixed income funds, especially during periods of heightened volatility.

How Do Growth and Income Funds Work in Practice?

Growth and income funds usually hold a mix of Australian shares, global equities, fixed interest, property, and sometimes alternative assets. The fund manager adjusts allocations to balance risk, return, and income generation based on prevailing market conditions.

For example, a popular Australian balanced fund in 2025 might hold:

40% Australian shares (with a tilt towards ASX blue chips like CBA, BHP, and Woolworths)
20% global equities (targeting US tech giants and emerging market growth stories)
20% fixed interest (including government and high-grade corporate bonds)
10% property and infrastructure
10% cash and alternatives

This approach can help smooth out returns—growth assets drive capital appreciation in strong markets, while income assets deliver regular payouts even when share prices are under pressure.

Real-World Example: In the 2024–2025 financial year, several leading Australian funds—such as Vanguard’s Diversified Growth and Income Fund and AustralianSuper’s Balanced Option—delivered total returns in the 7–8% range, with around 2–3% coming from income distributions. This blend has proven attractive for investors seeking both wealth building and cash flow.

Risks and Considerations: Is a Growth and Income Fund Right for You?

While the hybrid nature of these funds offers diversification, they’re not without risk. Key considerations include:

Market Risk: Exposure to shares means these funds are still vulnerable to market downturns. They’re not as defensive as pure income funds.
Income Variability: Dividend and interest payments can fluctuate, particularly if companies cut payouts or interest rates fall.
Fees: Actively managed funds can charge higher fees than passive index options. Check the fund’s PDS for details on management and performance fees.
Suitability: These funds work well for investors seeking a middle ground—not too aggressive, not too conservative. They’re popular in superannuation, family trusts, and for retirees drawing down income.

In 2025, many providers now offer both actively managed and index-based growth and income funds, giving investors flexibility on cost and investment philosophy.

How to Choose the Right Growth and Income Fund

Not all funds are created equal. When comparing options, consider:

Asset Allocation: What’s the split between growth and income assets? Does it match your risk tolerance and goals?
Historical Performance: While past performance isn’t a guarantee, look for consistent returns and transparency around income distributions.
Fees: Lower fees can make a big difference over the long term, especially in a low-yield environment.
Fund Manager Track Record: Experience and stability matter, especially in volatile markets.

Top-rated options in 2025 include funds from Vanguard, AustralianSuper, Perpetual, and BlackRock—all offering diversified portfolios with clear growth and income objectives.