Growth Fund
A Growth Fund is a type of mutual fund or exchange-traded fund (ETF) that primarily invests in Stocks of companies expected to grow at an above-average rate compared to their industry or the overall market. Growth funds typically focus on Capital Appreciation rather than income generation, meaning they prioritize Stocks that are anticipated to increase in value over time, even if those companies do not pay dividends.
Growth funds are generally characterized by:
- Investments in companies with high earnings growth potential.
- Higher risk and volatility compared to Value Funds, as they rely on future growth prospects.
- Investment strategies that may include sectors such as technology, healthcare, and consumer services.
Examples of Growth Funds include:
- Fidelity Growth Company Fund: Focuses on U.S. growth companies with strong earnings growth.
- T. Rowe Price Stock/">Growth Stock Fund: Invests in large-cap Stock/">Growth Stocks with strong fundamentals.
Cases of Growth Funds performing well are often seen during Bull Markets when investors are optimistic about economic growth. However, they may underperform during Bear Markets or economic downturns when growth prospects diminish.