Category: 

What is a Growth Mutual Fund?

Article Details
  • Written By: Luke Arthur
  • Edited By: Heather Bailey
  • Last Modified Date: 04 October 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
  • Print this Article

A growth mutual fund is a type of fund that focuses on investing in stocks that are poised for growth. The objective of this fund is to provide growth over anything else. Growth mutual funds provide professional money management, invest in growth stocks, are a long-term investment, and can provide steady returns.

One of the big benefits of investing in a growth mutual fund is that an investor will be able to take advantage of professional money management. A fund manager is going to be in charge of choosing the individual investments on behalf of the fund. This means investors can simply put money into the fund and allow the fund manager to handle the rest. Many investors prefer taking a passive approach to investing and utilizing this type of strategy.

Fund managers of this type of fund are going to try to identify growth stocks. Fund managers will do this by analyzing financial statements and other information from publicly traded companies. The fund managers will try to identify patterns of growth such as consecutive quarters of exceeding projections. The idea behind this type of fund is that fund managers can pick companies that are going to grow substantially and everyone will benefit from it.

Ad

Investors should keep in mind that a growth mutual fund is a type of long-term investment. This is not something that investors should plan on being involved with for only a few months. In most cases, a growth mutual fund should only be invested in if the investor has a time horizon of five years or more. If the investor tries to cash out sooner than that, he or she could end up taking a loss on the investment.

The growth mutual fund has been known to provide steady returns over the long term. This type of mutual fund is thought of as a good way to invest as long as the investor has plenty of time to wait. Over the long term, the stock market has always trended upward.

This means that even if the market goes through some down periods, it has historically always bounced back. In order to take advantage of the consistent growth of a company, investors have to be prepared to invest their money and wait. As long as they can do that, this type a mutual fund can provide returns that are superior to many other types of mutual funds in the market.

Ad

Recommended

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email