Growth stock mutual funds invest in firms with a focus on capital appreciation tipped for rapid progression.
Theoretically, mutual funds with the term “growth” in their titles are comprised of a mix of stocks tipped for rapid progression in the desired, upwards market value direction. However, as with all things, there is not necessarily always truth in advertising. Some mutual funds that banner themselves as growth stock entities do not quite measure up to the standard.
Growth Stock vs. Value Stock
There is no set definition of a growth stock vs. a value stock. In the simplest of terms, the former is attached to a company that has exponential opportunities to gain more market share, while a value stock is more of a blue chip company item that has already achieved – and will hold – its substantial, already achieved market share.
Each day, the Internet is full of experts ranking and suggesting top “growth stock” picks. Like everything else to do with the stock market, it’s a crap shoot. But in cases where stock pickers have their followings, it is usually because they are more often right than wrong. One of the areas in today’s economically challenged times that has become a favorite of growth stock watchers is the “green economy.” Companies involved in new energy solutions have recently benefited from a substantial amount of federal stimulus money. This, combined with the fact that the whole world is starting to turn green, can power the kind of vertiginous quarter-to-quarter growth that makes for a plum, growth stock pick. Other sectors that have done well despite the global recession are information technology, healthcare and utilities.
Wells Fargo Advantage Growth Fund
An example of a growth stock mutual fund is the Wells Fargo Advantage Growth Fund. It is comprised of 99 different stock holdings, most of which are domestic, U.S. Growth stocks. In 2010, one of the factors that helped the fund perform well was its investment in the companies Chipotle and Netflix, which showed huge growth. Wisely however, the fund is now reducing its position in these firms, as the growth may have peaked.
Motley Fool – “Beware of Misleading Mutual Funds”, October 18, 2010, Retrieved November 9, 2010 from http://www.fool.com/investing/mutual-funds/2010/10/18/beware-of-misleading-mutual-funds.aspx
Zacks.com – “Aggressive Stock Growth Picks”, November 9, 2010, Retrieved November 9, 2010 from http://www.zacks.com/commentary/16195/Aggressive+Growth+Stock+Picks-Nov.+9,+2010
US News – Wells Fargo Advantage Growth Fund, Retrieved November 9, 2010 from http://money.usnews.com/funds/wells-fargo-advantage-growth-fund/sgrax