A growth fund is a mutual fund that focuses on stocks that will increase rapidly in value. These are often newer companies, or stocks that are currently hot. These funds are not as focused on the long-term growth of a company, but rather how quickly it will grow in a short period of time. This means that the fund will purchase stocks at a lower price and sell them at a higher price, but much more quickly than a value fund.
A growth fund is riskier because if the market turns downward, the fund will reflect that change much more quickly. However it will also grow much more quickly in a good market. The fees associated with these funds tend to be higher since the fund is selling and purchasing stocks at a quicker rate.
These funds are attractive to people who like to see their money grow quickly. When you are in your twenties you may want to invest the largest percentage of your investments in growth funds, because you will experience the greatest amount of wealth building over time. You can do this through your 401K or through your own investments. It is important to remember that as you near retirement you will want to transfer your money into safer investments.
