Growth Equity

Growth mutual funds and ETFs invest in the equities of companies that... Growth mutual funds and ETFs invest in the equities of companies that are forecast to grow at a faster rate than the market average. Broadly speaking, this category is divided into U.S. and International Growth. Depending on their mandate, they may invest in equities of varying market capitalizations (small, medium, and large), sectors, as well as specific investment strategies. Growth companies tend to trade at higher valuations (price-earnings ratios, for example), than so-called value stocks. This is because they are typically valued more for their potential years from now, rather than their current revenue or earnings. On one hand, Growth companies can be good investments if they manage to meet or exceed forecasted revenue and earnings growth. On the other hand, a growth company that fails to meet estimated future revenue or earnings targets may significantly decline in value. Growth companies are purchased by investors primarily for their capital gains potential. While some do offer dividend payouts, these yields tend to be low. Growth companies that do have positive cash flow usually prefer to re-invest these funds in their operations. As a result, growth mutual funds and ETFs are usually appropriate for more aggressive investors willing to take on more risk in search of higher returns. Last Updated: 01/27/2025 View more View less

Growth mutual funds and ETFs invest in the equities of companies that are forecast to grow at a faster rate than the market average. Broadly speaking, this category is divided into U.S. and... Growth mutual funds and ETFs invest in the equities of companies that are forecast to grow at a faster rate than the market average. Broadly speaking, this category is divided into U.S. and International Growth. Depending on their mandate, they may invest in equities of varying market capitalizations (small, medium, and large), sectors, as well as specific investment strategies. Growth companies tend to trade at higher valuations (price-earnings ratios, for example), than so-called value stocks. This is because they are typically valued more for their potential years from now, rather than their current revenue or earnings. On one hand, Growth companies can be good investments if they manage to meet or exceed forecasted revenue and earnings growth. On the other hand, a growth company that fails to meet estimated future revenue or earnings targets may significantly decline in value. Growth companies are purchased by investors primarily for their capital gains potential. While some do offer dividend payouts, these yields tend to be low. Growth companies that do have positive cash flow usually prefer to re-invest these funds in their operations. As a result, growth mutual funds and ETFs are usually appropriate for more aggressive investors willing to take on more risk in search of higher returns. Last Updated: 01/27/2025 View more View less