Growth Funds

The general definition of a growth fund is a mutual fund whose objective it is to get you a high return on your investment in the form of appreciation. This type of fund is generally not looking for any sort of income stream, such as dividends, from your investment.

In order to reach their objective, basic growth funds almost always invest in stocks, and the stocks are typically from companies that have a good track record and show potential for growth over a long-term period. Any dividend income from investing in this type of fund is considered a bonus, but not a requirement.

When growth funds invest in an emerging company's stocks, they are considered aggressive growth funds. These funds are just like basic growth funds, but riskier because their objective is the highest return on your investment and this objective requires the funds to invest in less secure companies. The chance of receiving dividend income from your investment in an aggressive growth fund is very slim.

Also quite popular are what are known as growth and income funds or equity return funds. While the name implies that this type of fund is equally focused on both growth and income, this generally isn't really the case. This type of fund is still a growth fund, just a more conservative version of a basic growth fund.

Because these types of investment vehicles typically invest in less risky, stable, well-established companies expected to grow, they also produce dividends. This type of growth fund is usually less volatile than basic growth funds and almost always less volatile than aggressive growth funds. However, the long-term return on your investment is generally not as high. As with most investments, you trade the highest return rate for a level of safety.

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