Thread: Growth Mutual Funds

A Growth Mutual Fund also termed as Equity Funds are primarily invested in fast growing firms with the primary objective being Capital Appreciation – that is the profit you make from the Asset (Stock, Fund, Bonds) you invest upon. Growth Mutual Funds also defines the growth of that particular investment, i.e increase in its market price compared to the amount invested. It is also termed as “Capital Growth”.

A Growth Mutual Fund is more risky to be invested upon compared to an ordinary Mutual Fund but the premium or dividend that is derived is much higher then what is obtained from normal Mutual Fund Investments. Its performance is proportional to the performance of the Stock Market. That is when the Stock Market undergoes losses the value and price of the Fund falls rapidly compared to other Funds and similarly when the Market hits a high the price of the fund shoots up. People basically invest on Growth Funds keeping in mind long term goals. The reason, the logic behind the investment is that the companies, firms or organizations invested upon will grow in value, thereby allowing the fund to reap the benefits of large capital gains.
Basically a Growth Mutual Fund is categorized into 1) Aggressive Growth Fund, 2) Capital Appreciation Fund, 3) Balanced Fund and 4) Crossover Fund.
An aggressive growth fund basically aims for the highest capital gains and its investments are comparatively risky compared to the other Growth Funds. A Capital Appreciation Fund is also an aggressive growth fund that seeks maximum growth by Primarily Investing in stocks and takes excessive risks as far as the Assets to be invested upon is concerned. The Assets of a Balanced Fund comprises of common stock, preferred stock, bonds, and short-term bonds, The Prime Objective of a Balanced Fund is to provide both income and long time capital gains while avoiding excessive risk. These kinds of Funds have the maximum amount of investors, solely due to the fact that unlike the other aggressive funds this provides security along with the gains. A crossover fund has an investment both in the Public and Private Equity sector.

As far as investing in a Mutual Fund is concerned it is extremely important to bifurcate your finances amongst the Assets that you choose to invest upon. Asset Allocation is an important factor from the investor’s point of view. Choosing your assets properly will fetch you good returns. Prior to investing on a Mutual Fund it is necessary that you find out that the Fund you are targeting is worth investing upon or not. Every Mutual Fund publishes a set of documents that defines the value and reputation of the Fund. The three prime documents are 1) The Prospectus, 2) The Statement of additional information and 3) Annual Report. After the analysis is done choose your Assets (Stocks, Bond, funds, etc) carefully. The reason if you invest in four assets at a time and the return from the first two is a loss, you have the other two assets to give you the gains and hence your net asset value is stabilized. All in all your Mutual Fund NAV determines how good your investment was. Also consult a Fund Manager prior to making the investment, as it is him who decided the performance of a stock in the market.

Very interesting concepts in investing and thank you. It is good to be back.