Investors
are having a ball for growth funds are back. Surprisingly, growth funds which
were considered to be dead until a few months back are making an aggressive
comeback into the market with significant gains. So is it time to put your
money into growth funds again? Well, you can think about it but ensure that you
don’t overdo it. For those who came in late, internet growth funds are a
lucrative investment option primarily in an extremely diverse portfolio of stocks.
The main aim of internet growth funds is capital appreciation. There might or
might not be many dividend payouts.
The
money will be invested in companies that have higher growth rate and potential
and their earnings will be reinvested into further expansion and research. Like
the returns, the risks for growth funds are also high. Almost every investor
considers internet growth funds to be a high risk and volatile investment. This
is one of the reasons why many people are skeptical about growth fund investments.
They opt for more stabilized investment options like value funds or blend
funds. Another factor that investors have to consider is the long term period
associated with growth funds. Almost all growth funds require a holding term
period of five to ten years before they show results.
Growth vs. Value
The
stock market has always had a tendency to crumble under the pressure from
external events. It might be a war or just one of the major companies
announcing bad revenue in the last quarter. In such a scenario, growth stocks
can tumble very badly. On the contrary, value stocks can be a much better
option with long term consistent gains. The growth vs. Value debate has been on
going for years now. If growth stocks are what excite you, then so be it. However,
make sure that they occupy only up to 20% of your investment portfolio. Try to
balance it the moment it falls or rises above 5% of your allocated target.
Selecting your growth funds
There
are several internet growth funds vying for your attention. These include
moderate growth funds and aggressive growth funds. Make sure that you conduct a
lot of research about each type of growth fund before you make a selection.