Growth Option

Growth Option

Mutual funds offer various investment options for investors with different goals and risk tolerance. One such option is the growth option, which is a popular choice for investors who aim to accumulate wealth over the long term. In a growth option mutual fund, the focus is on capital appreciation, i.e., the increase in the value of the investment over time. Unlike income option mutual funds, growth option funds do not pay out dividends or regular income to investors. Instead, the gains are reinvested in the fund, leading to compounded growth.

Growth option mutual funds are ideal for investors who have a long-term investment horizon and are willing to take on higher risk for potentially higher returns. The funds typically invest in stocks of companies with high growth potential or in growth-oriented sectors such as technology, healthcare, and consumer discretionary. While the returns in a growth option mutual fund can be volatile and subject to market risks, historical data shows that over the long term, equities have outperformed other asset classes.

Investors can opt for a systematic investment plan (SIP) in growth option mutual funds to benefit from rupee cost averaging. In an SIP, investors can invest a fixed amount at regular intervals, such as monthly, and purchase more units of the mutual fund when the market is down and fewer units when the market is up. This strategy helps to mitigate the impact of market volatility on the investment and can potentially result in higher returns in the long run. Overall, growth option mutual funds can be an excellent investment option for investors looking for capital appreciation and are willing to take on higher risk for potentially higher returns.

Growth option is for those investors who are looking for capital appreciation. Say an investor aged 25 invests Rs 1 lakh in an equity scheme. He would not be requiring a regular income from his investment as his salary can be used for meeting his monthly expenses. He would instead want his money to grow and this can happen only if he remains invested for a long period of time.

Such an investor should go for Growth option. The NAV will fluctuate as the market moves. So if the scheme delivers a return of 12% after 1 year, his money would have grown by Rs. 12,000. Assuming that he had invested at a NAV of Rs. 100, then after 1 year the NAV would have grown to Rs 112.

Notice here that neither is any money coming out of the scheme, nor is the investor getting more units. His units will remain at 1,000 (1,00,000/100) which he bought when he invested Rs. 1 lakh @ Rs. 100/ unit.