What is a Growth Mutual Fund
Understanding the features of Growth Mutual Funds
- A Growth Fund is a type of Mutual Fund that invests in growing companies.
- The primary objective of investing in Growth Funds is capital appreciation.
- With Growth Funds, you receive little to no dividend since the earnings are reinvested in the company.
- Growth Funds provide high returns but are also subject to higher risks.
- Growth Funds are managed by fund managers and provide diversification.
Imagine if you could have invested in companies that are now household names when they were starting out. Now, with Growth Mutual Funds, your imagination can turn into reality. You have the chance to earn high returns by investing in growing companies that are on the fast track to progress.
What is a Growth Mutual Fund?
A Growth Mutual Fund is a type of Mutual Fund through which you can invest in stocks of emerging companies. Comprising of companies with a track record of high revenue or potential for growth, this type of Mutual Fund aims to achieve maximum capital appreciation. Since the main aim is capital appreciation, you will receive little to no dividend payouts. The earnings are reinvested towards the growth of the company.
Features of Growth Mutual Funds
With Growth Funds, you have the potential to earn high returns. Since most investors find this type of Mutual Fund appealing, fund managers take special care while curating companies in a Growth Mutual Fund Portfolio.
This type of Mutual Fund is more suited for investors with higher risk tolerance. Investors with moderate to conservative risk appetites or those who do not have adequate knowledge about the markets should steer clear of these investments.
Growth Funds can be highly volatile and experience sudden rises and drops. The value of your investment can grow substantially but may also fall equally fast, especially during market corrections and other socio-political factors that affect market prices.
Growth Funds are subject to Long-term Capital Gains Tax in India. You have to pay 10% LTCG on profits exceeding INR 1 lakh for investments held over a period exceeding one year. However, they are more tax-efficient compared to value stock mutual funds.
Like all mutual funds, Growth Funds are also managed by professional fund managers who carefully create investment strategies and identify the companies to invest in. The fund managers also make buying and selling decisions on your behalf, based on your investment objectives.
Investing in Growth Funds allows you to diversify your investment portfolio and potentially invest in funds that create profits in a shorter time frame.
Who Should Invest In Growth Mutual Funds?
Growth mutual funds are most suited to long-term investments. And while these investments can fetch you high returns, you must brace for market volatility, price fluctuations, and other risks associated with this investment. As such, you must evaluate your risk tolerance before investing in Growth Mutual Funds.
How to Invest in a Growth Mutual Fund?
Now that you know what is Growth Fund, you can invest in it easily. digibank by DBS. digibank is equipped with top-notch research facilities that help identify and pick investments tailored to suit your needs. With an array of investment options at your disposal, you can select investments suiting your risk profile. Invest in mutual funds via the digibank mobile app or the ibanking website from the comfort of your home!
Download digibank to explore the different mutual funds on offer.
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.