Mutual funds are basically investment portfolios which are either managed closely, as in the case of actively managed funds, or based on a particular index, such as in an indexed mutual fund. As the name suggests, actively managed funds offer investors and fund managers more flexibility, as strategies can be easily employed with the objective of increasing potential revenue.
Growth mutual funds, which may sometimes be simply referred to as growth funds, are portfolios which are created for the main purpose of generating as much profit as possible. In order to do this, investments are carefully planned and made in stocks which present very promising growth potential. These may zero in on booming industries, as well as those which are expected to peak very soon.
One of the advantages that investors can enjoy from getting into growth mutual funds, aside from the potential for large profits, is close professional management of their money. Investors who are not sure about which investments to make need not worry, since a fund manager will take over the process of determining which investments are to be made. This requires a lot of research and expertise, which a regular investor may not be well-equipped with.
Investors have to take note of the fact that growth funds are long-term investments. Oftentimes, investments are made in stocks of companies that are just about ready for an acceleration in growth. As such, it is not wise to expect payouts after just a few months. In fact, it may be necessary to wait for five to ten years before an investor can fully appreciate the large returns that growth funds have to offer.
