A so-called growth fund is actually a fund that aims to invest in long-term capital appreciation. Almost all fund users know that there are many different categories of funds, so today we'll have a good chat about what a growth fund means.
What does a growth fund mean.
The so-called growth fund, which we also call a growth fund, has the long-term capital appreciation as its investment objective. Growth funds invest mainly in stocks of small companies and stocks of some emerging industries that have greater appreciation potential in the market. In order to achieve the goal of *5 maximum appreciation, growth funds usually pay few dividends, but often reinvest the dividends, dividends and earnings from their investments to achieve capital appreciation. Growth funds primarily invest in equities as their primary objective.
Depending on the risk and return of investment, investment funds can be divided into growth, income and balanced investment funds. Growth equity funds are the mainstream of the fund market. According to the rating system for equity funds, growth funds are set up as opposed to value funds, and in defining growth funds, they are mainly classified according to the characteristics of the stocks held by the funds. Growth funds generally hold stocks with a high track record of growth, as well as characteristics such as a high price-to-earnings ratio and price-to-net ratio.
Funds that invest in growth stocks expect the long-term earnings potential of their portfolio companies to exceed market expectations, which may result from product innovation, increased market share or other reasons for growth in revenues and profits. In short, growth companies are considered to have a higher growth rate than the market average.
Some growth funds invest in a wide range of sectors; some growth funds invest in a relatively concentrated range, for example, by focusing on stocks in a particular sector or stocks that are considered undervalued. Growth funds are generally more volatile in price than conservative income funds or money market funds, but also generally have higher returns. Some growth funds have also spawned new types, such as capital growth funds, whose main objective is to seek rapid growth and sometimes even *5 appreciation of capital in the short term, typically investing in companies in emerging industries, for example. These funds tend to be highly speculative and therefore volatile.
Characteristics of growth funds.
Growth funds focus on the growth of listed companies in their stock selection
The growth of a listed company can be manifested either by the fact that the industry in which the listed company operates has good development prospects, is a sunrise industry, the profit rate of the industry is much higher than the average level of other industries, the industry enjoys preferential taxation or is favored by national policies in other aspects, or by the fact that the main business of the listed company has an outstanding market position, or that the fundamentals of the enterprise have changed significantly due to asset restructuring such as mergers and acquisitions, and the operating conditions of the enterprise have changed significantly. The rapid growth of a listed company can also be manifested by the outstanding market position of the main business of the listed company, or the substantial change in the fundamentals of the company as a result of asset restructuring such as mergers and acquisitions. At present, the high-tech sector and the biomedical sector are the only sectors with high growth potential, so growth investment funds also prefer stocks in these two sectors when selecting stocks.
Growth funds have relatively concentrated holdings
Growth funds maintain a high proportion of holdings in certain key bullish stocks while diversifying their exposure and portfolio investments.
Growth funds are polarized in terms of return volatility
Theoretically, growth funds carry a higher level of risk with a higher level of return. Generally speaking, growth funds are more volatile as market conditions rise and fall. In terms of changes in net unit value, some of the Growth Investment Funds that have been in existence for a shorter period of time have experienced greater changes in net value.
Comparison of growth funds.
Growth funds invest primarily in common stocks in emerging industries with growth potential. Compared with active growth funds, growth funds are slightly more conservative and these funds invest their assets primarily in common stocks of companies with good creditworthiness and long-term profitability or with more promising growth prospects. Long-term capital gains are the main source of income, and while the risk level is slightly lower than that of active growth funds, the volatility of the net asset value is also relatively high. These funds have a high potential for long-term capital appreciation as the price of the stocks in which they invest is expected to rise faster than the overall market price index on a long-time horizon.
The investment philosophy of a value fund is that the price of a stock may deviate from the intrinsic value of the stock over a heterodox period of time, but in the long run, the price of the stock will revert to its intrinsic value and converge. Therefore, the investment style of a value fund is to buy stocks whose current prices appear to be low compared to their intrinsic value, in the expectation that the stock prices will return to their proper and reasonable levels. Compared to growth funds, the investment risk is lower. Funds in this category mainly select companies with more mature and stable business models, less volatile cash flows and higher dividend payout rates. The prices of the stocks of these companies generally have low P/E and P/N ratios, are not very volatile and are resistant to falls. In market declines, this category often acts as a market stabilizer, but in bull markets, starting returns are lower compared to growth funds.
