Growth Funds at a Glance
Growth funds are mutual funds that have the objective of capital appreciation by investing money in growth stocks. The growth stocks are those that invest in shares in equity market with high profit margins. The rise of growth funds in the past few years has resulted in the overall success of the Indian mutual fund market. The Association of Mutual Funds of India and its regulatory The Securities and Exchange Board of India (SEBI) are the two main bodies that regulate the functioning of these high earning mutual funds.Why are these funds capable of giving high returns? Growth funds are usually the most advertised of mutual funds. Though there are income funds, balanced funds, debt funds and tax-saving funds, growth funds with or without ELSS (Equity Linked Saving Scheme with tax saving benefits) invest in blue-chip companies and sunshine sectors that promise high capital appreciation. The asset fund manager who has the responsibly to allocate investor money in sectors and companies that develop good returns smartly invests a good chunk of money in companies that show high growth rate in order to make the investors reap excellent returns for the money they pool in the mutual fund.
Since growth funds put a major part of the money in the equity market, there is an element of risk, which is why people with an appetite for risk and those in their 20s and 30s are advised to invest in growth funds. However, if you are wiling to invest monthly though an SIP(Systematic Investment Plan), you can benefit from rupee cost averaging, which brings down the risk factor in the business considerably. Since growth funds focus on the fastest growing companies in the market, you can expect to get high returns when the financial market is in the bullish phase.
Growth funds are more focused about how quickly the money can grow over a short period of time. This means the fund manager will buy stocks at a lower price and sell them at higher prices but quickly. If you have an appetite for risk and wish to see your money appreciate quickly, invest in a growth mutual fund. Make sure you research adequately about the best growth fund in the business and contact your mutual fund advisor or invest online. When you decide to go for a growth fund, find out how a particular fund has performed over a period of time. Consistent performance over the years is a good indicator about fund performance.