Definition of Growth Fund

What is a "growth fund"? What is the definition of the term "growth fund"?

In order to understand what a "growth fund" is, we first need to understand what a "growth stock" is.

A growth stock is a company that seeks to increase its value by plowing the majority of their earnings operation. This would be done through expansion, research and development, etc.

For instance, a great example of a growth stock is Amazon.com. Amazon.com pours a great deal of money into expansion and research and development and product development and acquisitions. Amazon.com is seeking to increase their value by investing heavily in itself.

On the other hand, a company that is not a "growth stock" may seek to disperse earnings through dividends. A company like this would quality as an "income stock".

As you can probably guess, a "growth fund" is a fund that invests in growth stocks.

Investing in a growth fund carries a higher amount of risk compared to investing in say, a bond fund or an income fund. On the other hand, the potential rewards are greater.


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