Best Growth Mutual Funds: Where To Invest?

Mutual funds are a popular investment option for individuals. They are managed funds that pool money from many participants to purchase a portfolio of stocks, bonds and other securities.

There are thousands of mutual funds available, and selecting the best ones to invest in is not easy. It depends on your risk profile, investment goals and time horizon.

If you are investing for the long term, equity mutual funds can be a good option. If you are investing for the short term, low-risk funds may be more suitable.

When choosing a mutual fund, it is important to consider the fund's history, expense ratio, fund manager's performance, consistency of returns and financial ratios such as alpha and beta.

- Fidelity International Index Fund (FSPSX)

- Fidelity U.S. Sustainability Index Fund (FITLX)

- Schwab S&P 500 Index Fund (SWPPX)

- Shelton Nasdaq-100 Index Fund Investor (NASDX)

- Schwab Fundamental US Large Company Index Fund (SFLNX)

- Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

- T. Rowe Price Mid-Cap Growth Fund (RPMGX)

- Vanguard Growth ETF (VUG)

- Fidelity Blue Chip Growth Fund (FBGRX)

- iShares Russell 1000 Growth ETF (IWF)

- BNY Mellon Large Cap Securities Fund

- Vontobel US Equity Institutional Fund

- AB Large Cap Growth Fund

Large-growth portfolios

BNY Mellon Large Cap Securities Fund

This fund seeks long-term capital growth, consistent with the preservation of capital. It normally invests at least 80% of its assets in equity securities of large-cap companies.

Vontobel US Equity Institutional Fund

This fund seeks long-term capital appreciation. It normally invests at least 80% of its assets in equity securities of large-cap companies, with a focus on common stocks.

AB Large Cap Growth Fund

This fund seeks long-term growth of capital. It invests primarily in equity securities of a limited number of large, carefully selected companies.

MFS Massachusetts Investors Growth Stock Fund

This fund seeks capital appreciation. It normally invests at least 80% of its net assets in stocks, including common stocks and real estate investment trusts.

Commerce Growth Fund

This fund seeks capital appreciation. It normally invests at least 65% of its total assets in stocks, primarily common stocks of large-cap companies.

Fidelity Advisor Series Equity Growth Fund

This fund seeks capital appreciation. It normally invests at least 80% of its assets in equity securities, primarily investing in common stocks.

Congress Large Cap Growth Fund

This fund seeks long-term capital growth. It attempts to achieve its investment objective by investing at least 80% of its net assets in equity securities of large-cap companies.

Growth funds to buy and hold

Growth funds are best suited for investors with a high-risk tolerance seeking capital appreciation. Here are some of the best growth funds to buy and hold:

Vanguard Growth ETF (VUG)

Vanguard's ETF is one of the most cost-effective ways to become a growth investor, with a cheap 0.04% expense ratio. The fund tracks the CRSP US Large Cap Growth Index, which holds a market-cap-weighted portfolio of 188 holdings screened for growth characteristics. The companies inside VUG exhibit a return on equity (ROE) of 42% and an earnings growth rate of 24.4% on average. However, VUG's portfolio is not very diversified, with a heavy tilt toward the technology sector (59.4%). The ETF is also top-heavy, with Apple, Microsoft, and Nvidia accounting for about 36% of its weight. Nevertheless, it is tax-efficient, with a low turnover rate of 5.3% and a minimal 0.5% 30-day SEC yield.

Fidelity Blue Chip Growth Fund (FBGRX)

FBGRX is an actively managed growth fund that has been around since 1987. It focuses on growth stocks that have blue-chip status, which Fidelity defines as "well-known, well-established, and well-capitalized." Over the trailing 10-, five-, three-, and one-year periods, FBGRX has outperformed its benchmark, the Russell 1000 Growth Index. The fund charges a 0.47% expense ratio with no minimum required investment.

IShares Russell 1000 Growth ETF (IWF)

The Russell 1000 Growth Index is a market-capitalization-weighted benchmark comprising large- and mid-cap companies selected based on higher price-to-book ratios, medium-term forecasted growth, and historical growth in sales per share over the past five years. This ETF charges a 0.19% expense ratio and has a five-star rating from Morningstar.

Fidelity Contrafund (FCNTX)

FCNTX is a growth fund that originally started as a contrarian-styled fund. It has a current portfolio allocation of 24.9% to technology, which is underrepresented compared to the S&P 500. Managed by William Danoff since 1990, FCNTX has consistently outperformed both the S&P 500 and the Morningstar "Large Growth" peer category. The fund currently charges a 0.39% expense ratio.

Invesco Nasdaq 100 ETF (QQQM)

QQQM provides access to the 100 largest non-financial companies listed on the Nasdaq exchange. Thanks to the Nasdaq exchange's higher-than-average listing of innovative technology, consumer discretionary, and communication sector stocks, QQQM has been categorized as a "Large Growth" fund. Investors who buy QQQM can get exposure to top holdings like Apple, Nvidia, Microsoft, Meta Platforms, Amazon, Tesla, and Alphabet. It charges a 0.15% expense ratio and is tax-efficient, with a low 0.6% 30-day SEC yield.

Invesco S&P 500 GARP ETF (SPGP)

SPGP tracks the 77 companies represented by the S&P 500 Growth at a Reasonable Price Index at a 0.36% expense ratio. This ETF offers a differentiated return and risk profile from traditional growth funds, which are agnostic to a company's quality characteristics and valuation measures. The benchmark tracked by SPGP screens for quality and value characteristics based on three-year earnings-per-share and sales-per-share growth, financial leverage, return on equity, and price-to-earnings ratios.

Pacer U.S. Cash Cows Growth ETF (BUL)

BUL utilizes a free cash flow yield approach, which tempers growth investing with an emphasis on paying fair value. The ETF starts with the S&P 900 Pure Growth Index and then isolates the top 50 companies with the highest free cash flow yield, weighting them by market capitalization. According to Pacer, this process results in an average free cash flow yield of 5.5% and a price-to-earnings ratio of 17.2 for BUL, compared to 3.6% and 34.5 for the S&P 900 Pure Growth Index. BUL charges a 0.6% expense ratio.

Growth stock mutual funds and ETFs

Large-Growth Mutual Funds:

• BNY Mellon Large Cap Securities Fund: Seeks long-term capital growth while adhering to Islamic principles.
• Vontobel US Equity Institutional Fund: Aims for long-term capital appreciation by investing primarily in equity securities.
• AB Large Cap Growth Fund: Focuses on long-term growth of capital by investing in a limited number of carefully selected companies.
• MFS Massachusetts Investors Growth Stock Fund: Seeks capital appreciation by investing primarily in common stocks and other equity securities.
• Commerce Growth Fund: Invests primarily in common stocks to achieve capital appreciation.

Growth ETFs:

• Vanguard Growth ETF (VUG): Tracks the CRSP US Large Cap Growth Index with a focus on companies exhibiting high growth rates and valuations.
• Fidelity Blue Chip Growth Fund (FBGRX): Focuses on blue-chip growth stocks, outperforming the Russell 1000 Growth Index over various periods.
• IShares Russell 1000 Growth ETF (IWF): Tracks the Russell 1000 Growth Index, which includes large- and mid-cap companies with strong growth potential.
• Fidelity Contrafund (FCNTX): A balanced growth fund with a focus on companies outside the technology sector, consistently outperforming the S&P 500 and its peer category.
• Invesco Nasdaq 100 ETF (QQQM): Provides access to the 100 largest non-financial companies listed on the Nasdaq exchange, including well-known tech and consumer discretionary stocks.
• Invesco S&P 500 GARP ETF (SPGP): Follows a "growth at a reasonable price" strategy, investing in companies with strong growth potential while considering valuation measures.

Other Top-Rated Growth Mutual Funds and ETFs:

• Brown Capital Management Small Company (BCSIX)
• Champlain Mid Cap (CIPMX)
• Champlain Small Company (CIPSX)
• Fidelity Growth Company (FDGRX)
• Loomis Sayles Growth (LSGRX)
• Morgan Stanley Institutional Discovery (MPEGX)
• Morgan Stanley Institutional Growth (MSEQX)
• Nationwide Small Company Growth (NWSAX)
• Primecap Odyssey Aggressive Growth (POAGX)
• Principal Blue Chip (PGBHX)
• Principal MidCap (PMBPX)
• T. Rowe Price All-Cap Opportunities (PRWAX)
• T. Rowe Price Institutional Mid-Cap Equity Growth (PMEGX)
• T. Rowe Price Mid-Cap Growth (RPMGX)
• Vanguard Capital Opportunity (VHCOX)
• Vanguard Growth Index/ETF (VIGAX VUG)
• Vanguard Russell 1000 Growth Index/ETF (VRGWX VONG)
• Vanguard S&P 500 Growth Index/ETF (VSPGX VOOG)
• Vanguard S&P Mid-Cap 400 Growth (VMFGX)
• Vanguard Small Cap Growth Index/ETF (VSGAX VBK)
• Wasatch Core Growth (WGROX)
• Wasatch Small Cap Growth (WAAEX)

Remember to conduct your own research, assess your risk tolerance, and consider consulting with a financial advisor before investing.

Mutual funds for different investor profiles

Mutual funds are a great way to invest in a diversified portfolio of stocks, bonds, or other securities. They are suitable for investors with different profiles, depending on their risk tolerance, investment goals, and time horizon. Here are some options for different investor profiles:

Conservative Investors:

• Money Market Mutual Funds: These funds invest in short-term, low-risk debt instruments like government Treasury bills and offer slightly higher returns than regular savings accounts. They are suitable for investors seeking capital preservation with minimal risk. Examples include Fidelity Intermediate Municipal Income Fund (FLTMX) and Vanguard Long-Term Investment-Grade Investor Shares (VWESX).
• Bond Mutual Funds: These funds invest in government and corporate bonds, providing a stable rate of return with lower potential average returns compared to stock funds. Examples include Dodge & Cox Income Fund (DODIX) and Schwab Fundamental US Large Company Index Fund (SFLNX).

Moderate Investors:

• Balanced Funds: These funds invest in a mix of stocks, bonds, and other securities to reduce risk through diversification. Examples include Fidelity U.S. Sustainability Index Fund (FITLX) and T. Rowe Price Mid-Cap Growth Fund (RPMGX).
• Large-Cap Value Funds: These funds invest in well-established, large-cap companies with strong financials but temporarily depressed share prices. Examples include Vanguard Growth Index/ETF (VIGAX) and Vanguard S&P 500 Growth Index/ETF (VSPGX).

Aggressive Investors:

• Growth Stock Mutual Funds: These funds focus on companies exhibiting high growth rates and typically have higher valuations. Examples include Vanguard Small Cap Growth Index I, Wasatch Small Cap Growth Investor, and Fidelity Growth Company (FDGRX).
• Sector Mutual Funds: These funds aim to profit from the performance of specific sectors like technology or healthcare. They can be more volatile but offer focused exposure to industries with high growth potential.

It is important to note that the above suggestions are general guidelines, and investors should carefully consider their own financial situation, risk tolerance, and investment objectives before choosing any mutual fund. Additionally, fees and expenses can significantly impact returns, so investors should always evaluate the costs associated with a mutual fund before investing.

Mutual fund types

Mutual funds can be classified based on the types of investments they hold. Here are some of the most common types of mutual funds:

• Stock mutual funds: Also called equity funds, this type of mutual fund owns shares of stock in public companies. Equity fund investors generally seek more appreciation than income payments, although there are specialized dividend funds that aim to generate yield.
• Bond mutual funds: Also referred to as fixed-income funds, this kind of mutual fund owns Treasurys, municipal bonds or corporate bonds. Bond fund investors tend to want income preservation and yield.
• Balanced funds: Also called blended funds, these mutual funds invest in a portfolio of both stocks and bonds.
• Money market mutual funds: These mutual funds tend to offer very low yields and very low risk compared with bond and equity funds. Instead of appreciation or yield, money market fund investors are looking to preserve the value of their cash above all else.
• Target date funds: These funds are designed for retirement investors and generally have a “target date” year when holders are expected to retire. They hold a mix of stocks, bonds and other securities. Over time, the portfolio shifts its allocation from riskier investments to safer investments.

Additionally, mutual funds can also be categorized based on the types of stocks they invest in, such as large-cap, mid-cap and small-cap funds. Large-cap funds invest in large, well-established companies, while small-cap funds focus on smaller, younger companies that may have more room for growth.

Frequently asked questions