A growth mutual fund is a special type of fund that aims at achieving capital appreciation by investing in growth stocks. Such funds focus on fast growing companies. They are also termed as equity funds.
The mutual fund market is gaining a lot of popularity since more and more investors are looking at investing in such funds and getting better returns. A growth mutual fund is a special type of fund that aims at achieving capital appreciation by investing in growth stocks.
Such funds focus on companies that are making significant earnings or revenue growth. In simple words, you can say that they focus on fast growing companies. They are also termed as equity funds.
Types of Growth/ Equity Funds
Generally growth/ equity funds are divided into two categories.
Aggressive Fund: This is a growth mutual fund that focuses at achieving the highest capital gains. The companies that hold such investments have a high growth potential and people investing in such funds should be prepared to face a high risk return trade off.
Conservative Fund: This is exactly the opposite of aggressive funds. This fund generally targets those people who are willing to earn on a regular basis and is considered a safe, secured and non risky investment.
Selecting Growth/ Equity Funds
A growth or equity mutual fund needs to be invested into after taking into consideration a variety of factors. These factors include:
Comparison of Funds:
Many of the funds belong to different categories like large cap, mid cap or small cap. The small caps fund target on smaller companies and have greater growth potential, whereas large cap funds have better stability. If you are a beginner, you might want to consider picking a large cap growth fund.
Choosing the Fund Family:
Fund families are companies that assist mutual fund units to investors. It is very essential to decide the exact sponsor or fund family since factors such as fees, expenditure percentages are closely related to the fund family.
Minimum Initial Investment:
Once you have finalized on the fund family, you might want to look at the minimum investment needed in the investing of the fund. For beginners, investing in a certain amount periodically without putting a lump sum of money would be a beneficial option.
Track Record:
Checking the track record both in the bear and bull market for the equity mutual funds will let you know the performance of the fund. There are many online websites that allow you to perform such analysis.
Expense Ratio:
Expense ratios are the expenses incurred by fund companies for managing the funds. The smaller the expense ratio, the better it will be for the investor. The expenses incurred by these companies will get directly charged to the fund.
Benefits of Investing In Growth/ Equity Funds
Some of the benefits of investing in a growth mutual funds are as follows:
When investing in growth mutual funds, investors get a certain amount of diversity. Since these funds only contain growth stocks, they tend to increase in specific types of economies
These are a better option for investors who need to lower their immediate income
In addition to this, they also offer low risks for investors
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