Difference Between Growth Funds and Value Funds

Growth Funds are typically equity-based mutual funds which mainly focusses on capital appreciation and providing higher returns at the time an investor exits the fund. These funds do not provide any dividend to the investors. The returns earned on the investment is constantly reinvested in the market for higher capital appreciation.

Value Funds are also equity-based mutual funds which mainly focusses on providing a regular income or yield to the investors in form of dividends. These funds do not provide immediate returns to the investor, but promises safety and regular dividends in future. However, dividends are given out only if the fund is making good profits.

The primary difference between growth funds and value funds is that while the former focusses on consistent growth of the investor’s money, the latter’s objective is to provide value to the investor in form of regular income or dividend. Here are some other differences between the two types of funds:

• Growth funds usually register higher earnings as compared to value funds. However, value funds provide regular dividends.
• Value fund units are usually cheaper than the growth funds because of lower costs of stocks that are involved in it.
• During the volatile market, value funds tend to do better than the growth funds.
• Growth funds are riskier than the value funds.
• Value funds provide steady returns over a long period of time whereas growth funds can provide good returns in long-term as well as short-term.

Growth funds are good for investors looking for capital appreciation and high returns over the long period of time. On the other hand, value funds are more suited for the investors looking for regular income during the investment period.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.