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Growth Fund Definition

The definition of a growth fund is a mutual or other fund that has it's core investments in emerging or growth companies. These funds and the stocks within it do not pay high dividends, but offer the chance to for high capital gains later on.

These funds are usually more turbulent in up and down years for the stock market. A growth fund is best for younger people or investors willing to assume some degree of risk.

Most portfolios should have some balance of these types of mutual funds. One of the characterisitics of the stocks in growths are low dividend pay out ratios. Since these stocks are normally emerging companies, the profit or net income that would normally go to shareholders in blue chip stocks - will be reinvested into the growth fund itself. This helps explain the full defintion of this type.

Trading

Trading growth type stock funds will depend on whether they are closed end or open end mutual funds. Closed end funds trade in the secondaey market, so there is no sales charge to worry about - only a commission. Open end stock funds are not meant for active trading. They are issued as new issues and are then bought and sold directly with the growth fund itself. A sales charge may apply to each purchase.

Mutual growth investments are prices daily - once a day, to it's Net Asset Value. Any trading that is done during the day will be filled at the close of business day. This makes it difficult to actively trade. Exchange traded funds (ETF's) allow for more active day training of growths.

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