What Is a Growth Stock Mutual Fund?

by Jay P. Whickson ; Updated July 27, 2017

A mutual fund is an investment where thousands of people combine their money to purchase a wide diversity of stocks, bonds or other types of investments. The mutual funds are limited to the type of investment shown in their prospectus.

Growth Stock

Growth stock is stock that seldom gives dividends but reinvests most of its money into the growth of the company.

Size

The companies included in the growth stock mutual fund might be large, medium or small. Most of the time the name of the mutual fund indicates the size of the company, such as a large cap growth stock fund.

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Significance

You get a certain amount of diversity when you purchase a mutual fund. However, since the fund contains only growth stock, most of the stocks tend to drop together or increase in specific types of economies and you see either dramatic gain or loss.

Benefits

If you purchase a growth stock mutual fund during times of a recession, you'll notice a huge increase in the value of the fund when the economy rises out of the recession.

Significance

Growth stock mutual funds tend to be better for someone that needs to lower their immediate income, since most of these companies don't give dividends.

Balance

It's always best to have both growth stock mutual funds and value stock funds in your portfolio for balance.

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