In today’s fast-changing investment world, a big question is: which mutual funds are best for long-term growth? Recent data points to growth stocks as a promising choice. The Morningstar US Growth Index saw a 21.49% return over the last 12 months. This beats the Morningstar US Value Index’s 14.56% gain.
But is this enough to say growth stocks are the only way to go? Or is there more to the story?
Key Takeaways
- The Morningstar US Growth Index outperformed the Morningstar US Value Index by a significant margin over the past 12 months.
- Many experts argue that value stocks may now present a better opportunity than growth stocks due to the widening performance gap.
- Funds with top Morningstar Medalist Ratings and 100% analyst coverage are expected to outperform over a full market cycle.
- Investors should research growth stock mutual funds and ETFs to understand their strategies and portfolios.
- The top-rated growth stock funds are poised to outperform in the long run, but investors may also consider global large-cap growth options.
Defining Growth Stock Investing
Growth stock investing is about picking companies that grow fast in earnings and revenue. These companies usually spend their profits on growing more, not paying dividends. Investors in growth stocks look beyond today’s value, hoping these companies will beat the market in the future.
Characteristics of Growth Stocks
Growth stocks have some key traits:
- Earnings Growth: They grow their earnings quickly, often faster than the market.
- Revenue Growth: Their sales keep going up, thanks to new products, expanding markets, and more customers.
- Momentum Investing: They focus on stocks that are going up fast, hoping to keep making money from their growth.
- High Valuations: These stocks often cost more than they’re worth, showing investors believe in their future.
Investment Strategies for Growth Investing
There are a few ways to invest in growth:
- Choose companies known for steady growth and hold onto them for a long time.
- Look for stocks that are going up fast and ride their momentum.
- Invest in companies that cost a lot but might not make money yet, hoping they’ll grow into profitability.
“Growth stocks are often considered riskier investments, but they also have the potential to deliver outsized returns for investors willing to take on that additional volatility.”
How Growth Mutual Funds and ETFs Work
Growth investing through mutual funds and ETFs offers various strategies. Growth stock mutual funds and ETFs use different investment strategies. Each strategy has its own goals and ways of working.
Some funds have small portfolios with 50 securities or less. Others own hundreds of stocks to spread out growth opportunities. The size and focus of a fund can affect its performance and how it’s built.
It’s key to research a fund’s strategy and read analyst reports before investing. Growth funds can focus on large, mid, or small-cap stocks. Each size offers different growth chances and risks.
Some mutual funds may stop taking new money to stick to their strategy. Watching a fund’s asset flows and capacity helps investors make smart choices.
| Key Characteristics | Growth Mutual Funds | Growth ETFs |
|---|---|---|
| Portfolio Size | Typically 50-200 securities | Can range from 50 to over 500 securities |
| Management Style | Actively managed | Passive, index-tracking |
| Fees | Higher expense ratios (0.60% average) | Lower expense ratios (often under 0.10%) |
| Tax Efficiency | May generate more taxable capital gains | Generally more tax-efficient |
| Trading | Execute trades once per day at NAV | Trade throughout the day at market prices |
Knowing the differences between growth mutual funds and ETFs helps investors. This knowledge aids in building a portfolio for long-term growth.
Best Mutual Funds for Long-Term Growth
For long-term growth, actively managed and index funds are great choices. Morningstar found top large-growth funds from firms like Fidelity, JPMorgan, and MainStay Winslow. These funds have shown strong performance in recent years.
Actively Managed Growth Funds
Actively managed funds have earned high Morningstar ratings. This means they are likely to beat their peers over time. For example, the MainStay Winslow Large Cap Growth fund has seen a 42.49% gain in the last 12 months.
It has also averaged 7.62% annual returns over three years. The Fidelity Contrafund is another standout. It has risen 41.69% in the last year and 15.63% year-to-date. Its average annual return over three years is 9.65%.
Index Growth Funds and ETFs
Index funds and ETFs have also shown great results. The Schwab US Large-Cap Growth ETF and the Vanguard Mega Cap Growth Index have top Morningstar ratings. The Vanguard Mega Cap Growth Index has risen 37.21% in the past year.
It has also climbed 8.27% annually over the past three years. The Schwab US Large-Cap Growth ETF is up 38.86% over the past year. It has also seen a 9.24% increase over the past three years.
“These top-performing growth funds have demonstrated their ability to generate strong returns for investors over the long term, making them compelling options for those seeking exposure to the growth investment style.”
Finding the Right Growth Fund for Your Portfolio
Investors should look beyond the top-rated funds from Morningstar. The Morningstar Investor Screener helps find growth funds that match your goals and risk level.
Using Screeners to Find Top-Rated Funds
Begin by picking the Investment Type in the Morningstar Investor Screener. Then, choose a Morningstar Category like Global Large Cap Growth. This helps focus on international or US large-cap growth stocks.
To find the best funds, select “Gold” under the Morningstar Medalist Rating. This ensures you get the highest-rated funds.
Or, use the screener to find a wide range of growth stock ETFs or mutual funds. Pick a category like Large Growth, Mid-Cap Growth, or Small Growth. This helps with fund research and portfolio diversification.
| Fund Type | Morningstar Category | Medalist Rating |
|---|---|---|
| Mutual Fund | Global Large Cap Growth | Gold |
| ETF | Mid-Cap Growth | Silver |
| Mutual Fund | Foreign Large Cap Growth | Bronze |
The Morningstar Investor Screener makes finding the right growth funds easy. It helps you choose the best options for your investment strategy and portfolio diversification goals.
Top-Performing Large-Growth Stock Funds
Recent years have seen some top large-growth stock funds shine. The $14.4 billion MainStay Winslow Large Cap Growth fund has gained 42.49% in the last 12 months. It has also averaged 7.62% annual returns over the past three years.
The $135.9 billion Fidelity Contrafund has seen a 41.69% rise in the last 12 months. It has also jumped 15.63% year-to-date. Over the past three years, it has averaged 9.65% annual returns.
The $26.3 billion Schwab US Large-Cap Growth ETF has gone up 38.86% in the past year. It has also seen a 9.24% increase over the past three years. These funds have all earned top Morningstar Medalist Ratings. This means they are expected to outperform over a full market cycle.
| Fund Name | 1-Year Return | 3-Year Avg. Return | Morningstar Rating |
|---|---|---|---|
| MainStay Winslow Large Cap Growth | 42.49% | 7.62% | ★★★★ |
| Fidelity Contrafund | 41.69% | 9.65% | ★★★★ |
| Schwab US Large-Cap Growth ETF | 38.86% | 9.24% | ★★★★ |
Large-growth funds have outperformed the overall stock market by 10.1 percentage points in 2023. The average large-growth fund has gained 34.6% year-to-date. This is compared to a 25.1% increase in the US Market Index.
However, over the last three years, the average large-growth fund has underperformed the index by 3.52 percentage points.
Investors looking for top-performing large-growth mutual funds should focus on those with Morningstar’s highest Medalist Ratings. These funds are well-positioned for long-term growth and fund selection.
Risks and Rewards of Growth Investing
Growth investing can be both exciting and risky. On one side, investing in companies with high growth potential can lead to big returns. But, these stocks often have higher volatility and risks. It’s important for investors to know the risks to manage their portfolios well.
Managing Risk in Growth Portfolios
To lessen the risks of growth investing, consider these strategies:
- Diversification: Spread investments across different sectors and asset classes to lower risk. Mutual funds and ETFs offer instant diversification.
- Risk Management: Analyze the financials, management, and competitive landscape of growth companies. Be ready to hold these stocks for 3–5 years to handle market ups and downs.
- Expense Control: High expense ratios and sales charges can cut into returns. Choose low-cost index funds or ETFs to boost long-term growth.
Growth investing comes with risks, but the rewards can be great for those who do their homework and manage their portfolios wisely. By understanding and tackling the risks, investors can be ready to seize long-term growth opportunities in the market.
| Metric | Value |
|---|---|
| Average Mutual Fund Expense Ratio | Not to exceed 1.50% |
| Exchange-Traded Funds (ETFs) Cost | Generally lower than mutual funds |
| Mutual Fund Portfolio Diversification | Typically 50-200 different securities |
| Stock Index Mutual Fund Diversification | Over 1,000 individual stock positions |
“The key to successful growth investing is identifying companies with the potential for sustained, above-average growth in earnings and revenue.”
Best Mutual Funds for Long-Term Growth
Investing in mutual funds can be a smart move for long-term growth. Morningstar highlights funds like MainStay Winslow Large Cap Growth and Fidelity Contrafund. Also, index funds such as Schwab US Large-Cap Growth ETF and Vanguard Mega Cap Growth Index are great choices.
These funds have earned top Morningstar Medalist Ratings. This means they are likely to do well over time. It’s important for investors to research these funds. They should look at the investment strategies and risk levels. Then, choose the funds that fit their goals and risk tolerance.
| Fund | 1-Year Return | 5-Year Return | 10-Year Return | Expense Ratio |
|---|---|---|---|---|
| Dodge & Cox Stock | 17.1% | 12.3% | 10.6% | 0.51% |
| Fidelity Blue Chip Growth | 56.5% | 20.3% | 16.6% | 0.69% |
| Mairs & Power Growth | 29.2% | 13.2% | 10.8% | 0.63% |
| Primecap Odyssey Growth | 21.8% | 10.2% | 11.2% | 0.66% |
| T. Rowe Price Dividend Growth | 19.0% | 12.8% | 11.8% | 0.64% |
| Vanguard Equity Income | 11.3% | 10.1% | 9.8% | 0.27% |
There are also top index funds and ETFs for long-term growth. Examples include Fidelity 500 Index Fund and Schwab S&P 500 Index Fund. Vanguard 500 Index Fund Admiral Shares and Vanguard Total Stock Market Index Fund Admiral Shares are also good options.
These funds offer low-cost, diversified market exposure. They are great for investors looking for long-term growth. The minimum investment for these funds is usually $3,000 or less, making them accessible to many.
“By investing in a diversified portfolio of top-performing growth funds, investors can potentially achieve strong long-term returns while managing their risk exposure.”
Conclusion
Investing for long-term growth can be very rewarding. But, it’s important to understand the risks and rewards of growth stocks and funds. Investors should spread out their investments and research the companies and funds they choose.
They should also be ready to keep their investments for at least three to five years. This approach helps manage risks and aims for steady growth.
Using tools like the Morningstar Investor Screener can help. It lets investors find top-rated growth funds. This way, they can build a portfolio that fits their goals and risk level.
The key is to balance risk and reward. It’s also important to focus on quality over speculation. And, staying disciplined in the long term is crucial for success in long-term growth investing, mutual fund selection, diversification, and risk management.
“Investing for the long-term is the best way to build wealth, but it requires patience, diligence, and a willingness to weather the inevitable ups and downs of the market.”
By following these principles and using the insights from this article, investors can set themselves up for success. Remember, the journey to financial security is a marathon, not a sprint. With the right approach, you can achieve sustainable growth and prosperity.
Top Mutual Funds for Long-Term Growth Investing
In the fast-changing world of finance, where should smart investors look for long-term growth? The S&P 500 index saw a 30% total return in the last 12 months. Meanwhile, the Russell 2000 and the S&P MidCap 400 indexes rose by 10% and 13%, respectively. This shows growth stocks are beating value stocks. But, is growth still the top choice for lasting growth?
Key Takeaways
- Investing in the best mutual funds for long-term growth can provide exposure to key growth sectors and industries.
- Both actively managed growth funds and index-based growth funds and ETFs can offer opportunities for compounding returns over time.
- Carefully evaluating factors like expense ratios, diversification, and historical performance can help identify the most suitable growth funds for your portfolio.
- Balancing growth investments with value and income-oriented funds can create a well-rounded, diversified portfolio.
- Regularly monitoring and rebalancing your growth fund holdings can help manage risk and capitalize on shifting market trends.
As investors face this complex landscape, knowing about growth stock investing is key. Understanding the best mutual funds for long-term growth is essential. This guide will help you grasp the details of growth stocks and the strategies of growth funds and ETFs. It aims to give you the knowledge to make smart choices and build a portfolio ready for lasting growth.
Defining Growth Stock Investing
Growth stock investing is about picking companies that grow fast in earnings and revenue. These companies usually have high prices but are seen as promising for the future. Investors look for businesses that can keep growing and give big returns over time.
Characteristics of Growth Stocks
Growth stocks have some key traits:
- Earnings Growth: They grow their earnings quickly, often faster than the market.
- Revenue Growth: They see steady and big increases in revenue, showing their potential.
- Momentum Investing: Some investors bet on stocks that are already rising in price.
- Valuation: These stocks often have high P/E ratios because investors are willing to pay more for their growth.
Investment Strategies for Growth Investing
There are ways to invest in growth stocks:
- Look for companies with a history of growing earnings and revenue, even if they’re pricey.
- Find stocks with financial metrics that are getting better and have a history of beating the market.
- Spread investments across various growth sectors and industries to balance risk and find more chances for success.
The goal is to find companies that can keep growing and add value for shareholders. By studying growth stock traits and matching investment plans with personal goals, investors can aim for better-than-market returns.
How Growth Mutual Funds and ETFs Work
Growth mutual funds and ETFs are great for those looking to grow their money over time. They use different strategies to pick stocks, from a few dozen to hundreds. This helps them aim for long-term gains.
Some focus on big companies, while others look at smaller ones. It’s key to know that mutual funds might not always let you in. This is to keep their strategy and mix of stocks right. Always check the fund’s approach and read analyst reports before investing.
| Feature | Growth Mutual Funds | Growth ETFs |
|---|---|---|
| Management Style | Actively Managed | Passively Managed |
| Portfolio Composition | Focused (50-100 stocks) | Diversified (hundreds of stocks) |
| Minimum Investment | Typically $500 – $3,000 | No minimum |
| Expense Ratios | Higher (0.47% average) | Lower (0.16% average) |
| Trading | End of day pricing | Intraday trading |
When choosing between growth mutual funds and ETFs, think about your goals and how much risk you can take. Also, consider what fits best with your overall investment plan.
Best Mutual Funds for Long-Term Growth
Mutual funds are great for long-term growth in your portfolio. Both actively managed and index funds can offer strong returns. Knowing the differences helps investors choose wisely.
Actively Managed Growth Funds
Actively managed funds have skilled managers picking stocks for growth. They’ve earned top Morningstar Medalist Ratings. This means they’re likely to beat the market over time.
The MainStay Winslow Large Cap Growth fund has seen a 42.49% gain in the last year. It averages 7.62% annual returns over three years. The Fidelity Contrafund has also done well, with a 41.69% gain last year and 15.63% year-to-date. It averages 9.65% annually over three years.
Index Growth Funds and ETFs
Index funds and ETFs follow market indexes like the S&P 500. They focus on large-cap growth stocks. This approach has proven successful.
The Schwab US Large-Cap Growth ETF has seen a 38.86% gain in the past year. It averages 9.24% annually over three years. The Vanguard Mega Cap Growth Index has also performed well, with a 37.21% gain last year. It averages 8.27% annually over three years. Both have earned top Morningstar Medalist Ratings.
“Actively managed growth funds and index growth funds have both demonstrated the ability to deliver strong returns over time.”
Finding the Right Growth Fund for Your Portfolio
Choosing the best growth mutual funds for your portfolio is key. Don’t just look at the top funds from Morningstar. Use the Morningstar Investor Screener to find more growth funds that fit your goals and risk level.
Using Screeners to Find Top-Rated Funds
The Morningstar Investor Screener helps you find growth funds easily. First, pick the type of investment you want, like ETFs or mutual funds. Then, choose a Morningstar Category, like Global Large Cap Growth, to focus on your preferred type of investment.
To find the best funds, filter by the Gold Morningstar Medalist Rating. This shows funds with top performance and good management.
Or, use the screener to see all growth stock funds, not just the top ones. Pick a category that matches your investment strategy. This way, you can understand the growth fund market better and make a smarter choice.
| Morningstar Category | Investment Focus | Risk Level |
|---|---|---|
| Large Growth | Domestic large-cap growth stocks | Moderate to High |
| Mid-Cap Growth | Domestic mid-cap growth stocks | Moderate to High |
| Small Growth | Domestic small-cap growth stocks | High |
| Foreign Large Cap Growth | International large-cap growth stocks | Moderate to High |
| Foreign Small/Mid Growth | International small- and mid-cap growth stocks | High |
By researching and comparing growth funds with the Morningstar Investor Screener, you can create a diverse portfolio. This aligns with your investment goals and risk level. It helps you grow your portfolio sustainably over time.
Top-Performing Large-Growth Stock Funds
Recent years have seen some top large-growth stock funds shine. The $14.4 billion MainStay Winslow Large Cap Growth fund has gained 42.49% in the last 12 months. It has also averaged 7.62% annual returns over the past three years.
The $135.9 billion Fidelity Contrafund has also done well. It has risen 41.69% over the last 12 months and 15.63% year-to-date. Over the past three years, it averaged 9.65% annual returns.
The Morningstar Rating™ system helps identify top funds. It rates funds from 5-star (top 10%) to 1-star (bottom 10%) based on three-year performance. This system can guide investors in choosing the best growth funds for their portfolios.
Using Morningstar’s research and ratings, investors can find funds with strong long-term performance. These funds have the potential to deliver solid returns in the future. This is key for building a diversified portfolio focused on growth.
FAQ
What are the characteristics of growth stocks?
Growth stock investors look for companies that are growing. They don’t mind paying a high price for these stocks. Growth can be measured in different ways, like earnings or revenue growth.
What are some common investment strategies for growth investing?
Some investors buy stocks with high valuations, expecting earnings growth. Others focus on stocks with rising earnings and prices. Some even invest in companies without earnings, hoping for future growth.
How do growth mutual funds and ETFs differ in their approaches?
Growth mutual funds and ETFs often have smaller portfolios. They might focus on large, midsize, or small companies. Some funds stop taking new money to focus on their investments.
What are some of the best-performing large-growth mutual funds?
Top large-growth funds include those from Fidelity, JPMorgan, and MainStay Winslow. Index funds like Schwab US Large-Cap Growth ETF also perform well. These funds have earned high ratings and outperformed the market.
How can investors find the right growth fund for their portfolio?
Investors can use the Morningstar Investor Screener. They can set criteria like Morningstar Category and Medalist Rating. This helps find funds that match their goals and risk level.