Equity mutual funds fall under many fund types and categories but the two primary classifications are growth and value. It is important for investors to know the difference between growth funds and value funds to build an investment strategy and portfolio to suit their investment objectives.
What Are Growth Funds. What is their investment strategy?
Growth funds buy growth stocks. The companies in the portfolio are expected to grow at a rate faster than the overall stock market. These stocks tend to perform best when the economy is in the mid to late phase of the business cycle and corporate profits are healthy. Typically, growth stocks have low dividend yields and more than average valuations as measured by price-to-earnings (P/E), market capitalization to sales and price to book value ratios (P/B), showing the market's high expectations of superior growth. Growth funds can buy both large and mid cap stocks.
