With few dividend payouts or none at all, companies whose stocks make up the portfolio of a growth fund focus almost exclusively on capital growth. These firms exhibit superior earnings growth, continuously investing them into expansions, acquisitions and research and development. Compared to the value and blend categories, this class of funds carry a relatively higher risk component. Reaping the maximum benefit from them also requires a longer investment horizon, between five to ten years. However, with the benefits of widely diversified portfolios and expert management, they are still less risky then sectoral funds.
Below we will share with you 5 top rated growth mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.
Fidelity Growth Discovery (FDSVX) seeks capital growth. The fund focuses on acquiring common stocks. It selects companies after considering their potential to deliver significant growth over the long term. It utilizes fundamental analysis of the issuing companies as the basis of selecting stocks. The growth mutual fund has a five year annualized return of 4.91%.
The growth mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.75% compared to a category average of 1.32%.
ING Growth Opportunities A (NLCAX) invests a large proportion of its assets in domestic companies with the potential for superior growth. Not more than 15% of its assets may be utilized to purchase foreign securities. The growth mutual fund returned 28.17% over the last one year period.
Jeff F. Bianchi is the fund manager and he has managed this growth mutual fund since 2009.
Baron Growth Retail (BGRFX) seeks capital appreciation. The fund invests the majority of its assets in small growth-oriented companies with market capitalizations not exceeding $2.5 billion. It purchases securities in businesses which could double in value in four to five years. It is a no load fund.
The growth mutual fund has a ten year annualized return of 8.88%.
BlackRock Focus Growth A (MDFOX) primarily invests in common stocks of 25 to 35 companies with above-average growth potential. It focuses on acquiring equity securities of mid-cap and large-cap companies. Not more than 20% of its assets are invested in foreign securities. The growth mutual fund returned 33.01% over the last one year period.
As of February 2011, this growth mutual fund held 33 issues, with 7.37% of its total assets invested in Apple, Inc.
RS Select Growth A (RSDGX) seeks capital growth by investing in small and mid-cap growth-oriented companies. It focuses on acquiring equity securities of companies whose market capitalizations may be at most 120% of the market cap of the largest company in the Russell 2500 Index. The growth mutual fund has a three year annualized return of 8.88%.
The growth mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.35% compared to a category average of 1.54%.
To view the Zacks Rank and past performance of all growth mutual funds, then click here.