What are mutual growth equity funds?

Definition:

Growth mutual funds are funds that focus on developing companies. These companies are usually small companies that are expanding. They may also be in active industrial sectors. These industries are expected to grow at a faster rate than the overall stock market.

How do growth mutual funds work?

Growth mutual funds invest in many stocks. This allows you to own shares in many companies without buying individual stocks.

Growth mutual funds buy growth stocks and hold them. If you want to increase your assets over time, growth mutual funds can help you achieve that goal. However, they come with more risks than funds that invest in larger, more stable companies and industries.

Note: Two popular growth funds are Vanguard Growth Index (VIGAX) and Fidelity Growth Company (FDGRX). But remember that a growth fund will not always have the word “growth” in its name.

Types of growth stocks

Other areas where growth stocks can sometimes be found are consumer discretionary stocks. These are also known as “cyclical consumer stocks.”

These stocks invest in companies that produce or provide non-essential products or services. These products and services can be things like luxury goods, hotels, and entertainment.

If you want to invest in growth stocks, remember that they may go through many periods where their values fluctuate up and down. Growth funds can achieve high returns in any given year, but they also drop more than regular stock funds during downturns in the market. Therefore, growth mutual funds are considered the best option for aggressive investors. You will need a long-term investment horizon, like ten years or more, to give you time to recover and see growth in your investment despite value declines.

Alternatives to growth mutual funds

Not sure if growth mutual funds are the right choice for you? You might want to consider value stock funds.

Value stock funds invest in companies that are trading at a lower price than what their business fundamentals suggest. This means they are a good value for your money.

Many value stock funds pay dividends. This gives you regular income along with the potential appreciation of your investment. Therefore, they are popular among retirees who rely on income generated from dividends.

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Sources:

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Meta. “Facebook’s announcement of IPO pricing.” Meta. “Facebook Annual Report 2012”, page 41. Yahoo Finance. “Meta Platforms, Inc. (FB).” Morningstar. “Meta Platforms, Inc. Class A.” Meta. “Facebook Reports Fourth Quarter and Full Year 2020.” CompaniesMarketCap.com. “Meta (Facebook) (FB).”

Source: https://www.thebalancemoney.com/what-are-growth-stock-funds-2466757