What is ‘growth’?
Simply put, it means a rise, expansion, escalation or development. But in mutual fund (MF) parlance, it could mean several things. It could either mean a scheme, a plan or even a philosophy. When you wish to invest in MFs, make sure you know which growth you are looking for and opt for the right one.
When it’s a name
Many equity schemes have the word “growth”, such as HDFC Growth Fund. These are some of the simplest names that you can find in equity funds. The other most frequently-used word by funds is “equity”, such as HDFC Equity Fund. A fund could have both the schemes—“growth” and “equity”—with different management styles even though both would invest in stocks.
When it’s a plan
Most funds offer two options—dividend and growth. The dividend plan aims to distribute dividends on a periodical basis whenever funds have distributable profits. The growth option accumulates your gains. Returns from both plans are the same as they share a common portfolio.
When it’s a style
Sometimes, fund houses have two broad management styles—growth and value. Here, growth means that the fund invests in stocks growing at a fast rate and market favourites. These are aggressive funds. A “value” fund invests in fundamentally sound stocks that are ignored by the market but have potential to do well in future. These funds are slightly conservative.