Growth Mutual Funds of India

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Growth mutual funds aim to invest in growth stocks so as to appreciate the capital. Such growth funds are preferred by investors who are seeking good growth of capital along with moderate current income. Those with sufficient appetite for risk can opt for growth mutual funds. An investor seeking above average earnings would typically opt for a growth fund. If you are looking for long-term appreciation, then growth mutual fund is for you!

These growth funds invest in companies that show tremendous revenue growth and returns. Often it is a mix of growth stocks, stocks paying high dividends as well as corporate bonds. Most growth mutual funds in India invest in Life Sciences, retailing, light manufacturing, healthcare, logistics and information technology and ITES.

Growth funds work well in a bullish environment. In India, growth mutual funds are performing well due to the growth spurt that the industries are showing. But growth funds in India also show the steepest fall during bear markets. They are highly volatile.

So if you are an investor seeking to increase current income, then growth funds are not for you. Dividends paid out by stocks invested are usually reinvested in stock. This leads to higher Net Asset Value (NAV) of the growth mutual fund. The growth fund managers use the dividend to buy more units on behalf of the investors. This leads to capital gain.