Definition
The term growth fund refers to a portfolio of stocks that are expected to provide above average earnings or revenue growth. The same equities that provide growth funds with the potential for higher than average returns will also have above average risk.
Explanation
Growth funds specialize in purchasing equities of companies the fund's management team estimates will have above average growth in either earnings or revenues. As such, the value of these equities is expected to increase faster than average. The stated objective of a typical growth fund will be "capital appreciation."
The companies included in a growth fund's portfolio are likely to be expanding operations through organic opportunities as well as acquisitions. Companies with a lot of opportunities to expand operations will typically reinvest their earnings into internal efforts such as research and development. This means growth of earnings will not be returned to the investor in the form of dividends.
Investors choosing growth funds should have relatively high risk tolerance scores, since their investment becomes a commitment to a portfolio of companies with longer term growth potential. While the value of these stocks can be expected to increase rapidly during a bull market, they can also be expected to decrease faster during a bear market, thereby exhibiting above average volatility.
Related Terms
- The term hedge fund refers to an investment and business structure that pools capital from individuals and invests in a variety of securities. The objective of a hedge fund is to provide investors with above average returns by assuming above average risk.
Moneyzine EditorNovember 6th, 2024 
The term aggressive growth fund refers to a portfolio of securities that attempts to maximize capital appreciation. There is a risk-reward trade off when investing in an aggressive growth fund; the greater returns associated with these funds means the investor is willing to accept more risk too.Moneyzine EditorNovember 6th, 2024- The term value fund refers to a portfolio of stocks that are deemed to be undervalued by the market. The objective of a value fund includes not only providing investors with capital appreciation, but also a steady stream of dividends.Moneyzine EditorNovember 6th, 2024
The term blend fund refers to a portfolio of securities that include both growth stocks as well as equities deemed to be undervalued by the market. The objective of a blend fund is to provide investors with higher than average capital appreciation.Moneyzine EditorNovember 6th, 2024- The term vulture fund refers to a portfolio of investments that specialize in holding the securities of financially distressed organizations. Vulture funds provide their investors with higher than average yields by purchasing securities at depressed prices.Moneyzine EditorNovember 6th, 2024
The term family of funds refers to the range of mutual funds offered by a single management company. Typically, a company's family of funds will provide individuals with the ability to select from a wide array of investment objectives.Moneyzine EditorNovember 6th, 2024
