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What is a Growth Mutual Fund?

Mutual fund overload.  That’s what it feels like sometimes…especially when you look at your 401k menu trying to decide which ones to select.  But that’s nothing compared to how many mutual funds there are…period.  In the United States alone…close to 10,000.

I read there are 275 different car models available in the US.  That’s a big menu.  Think of all the time you spend car shopping.  Researching makes and models and custom packages…how do we ever decide on a car?

How do we even start on a mutual fund? Fortunately in the mutual fund universe, there are some basic categories that help narrow the field of possibilities.  Today we’re looking at Growth Mutual Funds…often referred to as simply…Growth Funds.

Growth Funds fall under the broad category of Stock Funds.  We’ve covered stocks and bonds and mutual funds in others videos.  Be sure to check those out too.

Growth Funds invest in companies expected to grow faster than the overall market or faster than their peers…companies in the same industry.  Growth Fund managers look for companies growing revenue and earnings at a better than average clip.  These companies typically reinvest their profits into the business rather than paying out dividends.  That can put these fast trackers on an even faster track.

And that’s what makes them attractive.  The potential for better than average returns.  Think Facebook, Amazon, Netflix and the like.  For that same reason, Growth Funds are considered a little more aggressive than their generally less volatile sibling…Value Funds.

We’ll take a peek at Value Funds in another video…it’ll pay dividends.