When it comes to building wealth over time, growth funds are a top choice for many investors. These funds focus on companies with the potential for significant growth, often in sectors like technology, healthcare, and consumer goods. But with so many options available, how do you determine which growth funds are worth holding for the long term?

The key lies in understanding what makes a growth fund a strong investment and identifying the ones that align with your financial goals. In this article, we'll take a closer look at some of the best growth funds to buy and hold, as well as how to evaluate them for long-term success.

Factors to Consider When Choosing Growth Funds to Hold

Fund Performance

Past performance isn't always an indicator of future results, but it can provide insight into how a fund has navigated different market conditions. Look for funds that have consistently outperformed their benchmarks over the long term. It's also worth comparing the fund's performance against similar funds to ensure that it offers competitive returns.

Fund fees

High fees can eat into your returns over time, especially for long-term investments. When choosing a growth fund, look for funds with low expense ratios to maximize your investment growth. ETFs typically have lower fees than actively managed funds, so consider this factor if minimizing costs is important to you.

Sector and Industry Exposure

There are differences in the sectors and industries that different growth funds are focused on. Some would target emerging technologies like AI or renewable energy, and others might be focused more on healthcare or consumer goods. Consider which of those sectors you believe are best positioned for growth over the next few years, then select funds that fit with those sectors.

Risk Tolerance and Volatility

Growth funds tend to be more volatile than other investment types because the stocks held within these funds tend to vary considerably in value. Even though volatility often means greater returns, this does mean increased risk, and one needs to evaluate how much one is comfortable with these potential ups and downs.

Top Growth Funds to Buy and Hold for 2024

American Funds Growth Fund of America (AGTHX)

This actively managed fund has a long track record of success. It focuses on a mix of established and emerging growth companies. The portfolio includes stocks from various sectors, such as technology, healthcare, and consumer goods. Its global exposure makes it appealing for investors seeking diversification beyond the U.S. market.

ARK Innovation ETF (ARKK)

For investors interested in cutting-edge technologies and disruptive innovation, ARK Innovation ETF is a standout choice. The fund focuses on companies pioneering advancements in areas like artificial intelligence, genomic research, and renewable energy. While it carries higher volatility, it offers significant growth potential for those with a high-risk tolerance.

Invesco QQQ Trust (QQQ)

This ETF tracks the Nasdaq-100 Index, which includes many of the largest and fastest-growing technology companies. With exposure to names like Nvidia, Tesla, and Alphabet, the QQQ offers a tech-heavy growth option that aligns well with long-term growth trends in the tech sector.

T. Rowe Price Mid-Cap Growth Fund (RPMGX)

This fund focuses on mid-cap companies with strong growth potential for investors looking to diversify beyond large-cap stocks. Mid-cap stocks often balance the high-growth potential of small-cap stocks with the stability of large-cap companies, making them a good option for moderate risk-takers.

iShares Russell 1000 Growth ETF (IWF)

This ETF provides exposure to the largest and most growth-oriented companies in the U.S., based on the Russell 1000 Growth Index. Its diversified portfolio spans sectors such as tech, healthcare, and financials, making it a stable choice for long-term investors seeking broad market exposure.

JPMorgan Large Cap Growth Fund (OLGAX)

This actively managed fund prioritizes large-cap companies with robust growth potential. The fund managers focus on businesses with strong fundamentals and competitive advantages, aiming to deliver consistent performance over time.

BlackRock Advantage Large Cap Growth Fund (BMCIX)

This fund targets growth opportunities among large-cap stocks while maintaining a disciplined approach to risk management. Its diversified portfolio includes companies from sectors like technology, healthcare, and industrials, offering stability and growth potential for long-term investors.

How to Manage Your Growth Fund Investments Over Time?

Reinvest Dividends: If your growth fund generates dividends, reinvesting them back into the fund can help accelerate your wealth-building process. Many growth funds automatically reinvest dividends, but if yours doesn’t, be sure to set up a plan to reinvest them manually.

Monitor Performance Regularly: While you don’t need to check your growth fund every day, it’s a good idea to monitor its performance periodically. This can help you stay informed about how it’s performing relative to the market and other funds in your portfolio.

Avoid Panic Selling: Growth funds are known for their volatility, which means that market fluctuations are inevitable. During periods of downturn, it’s important not to panic and sell your shares. Instead, focus on your long-term strategy and ride out the market’s ups and downs.

Periodic Rebalancing: Over time, some of your investments may grow faster than others, causing your portfolio to become unbalanced. Periodically rebalancing your portfolio ensures that you maintain the right mix of assets to align with your goals and risk tolerance.

Conclusion: Why Growth Funds Are Worth the Wait

Growth funds offer one of the best ways to build wealth over the long term. With the potential for higher returns and the ability to capitalize on the growth of emerging companies, they can be a valuable part of your investment strategy. By carefully selecting the best growth funds to buy and hold, considering factors like performance, fees, and risk tolerance, and staying patient through market fluctuations, you can increase your chances of long-term financial success. Whether you're just starting or looking to fine-tune your portfolio, growth funds offer a pathway to achieving your investment goals.