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What is a Growth Fund?

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Growth Fund

A growth fund is a type of mutual fund that seeks to give capital appreciation. There is diversified portfolio of stocks that gives capital appreciation. There may or may not any dividend payouts.

The fund manager invests lot of time to research the best capital appreciation shares available in the market.

Advantages of Growth Funds

Here I am enumerating few reasons to invest in growth funds.

  1. Capital Appreciation

One of the major reasons of investing in growth fund is that they provide capital appreciation. This fund attracts to those who desire to have large gains over a short period of time.

  1. Diversification of Funds

Another major advantage of investing in growth funds is that you get diversification. This also helps you to lower the overall risk.

  1. Professional Money Management

The problem in investing in the stocks of company is to identifying which companies will grow rapidly in future. When you invest in a growth fund, you have a professional money manager to identify growth stocks for you.

Disadvantages of Growth Funds

The major disadvantages of growth Funds are:

  • High Risk of Loss
  • Require long term commitment
  • volatility
  • High cost of Fund management
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Swati Negi is a Senior officer of ICICI Bank. She is a post graduate in Finance and Banking operations. Swati is an enthusiastic writer and has been writing for various websites, magazines and newspapers. Her forte is financial blogs.