Tuesday, March 08, 2011

Types of Mutual Funds: GROWTH FUNDS

A growth fund seeks to provide its shareholders with long-term capital appreciation. Growth funds seek to achieve that objective by investing in growth stocks or companies that reinvest earnings to build their business through expansion, acquisition, or research and development. Growth funds, which may focus on companies of the same size i.e. say all small-caps or include companies of different sizes in their portfolios, tend to be more volatile than funds with more conservative goals, such as providing regular if modest income. Not surprisingly, the greater the potential for profit that a growth fund may provide comes with the increased risk of losing capital. Growth Duns are Mutual funds with a primary investment objective of long-term growth of capital. Unlike income, which is somewhat regular and consistent in most cases, growth is much less certain. Growth investments, however, usually outpace the returns on income investments over the long-term. A growth fund invests mainly in common stocks with significant growth potential.
Growth funds offer tremendous opportunities for growth, when the financial market is bullish. In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear markets. Only aggressive investors, or those with enough time to make up for short-term market losses, should buy these funds. In India, growth funds became popular after the tremendous growth of the Indian companies during the post economic reforms period. The rapid growth of Indian industry attracted investors’ money to sectors of high growth and as a result growth funds came into being.

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