With a long-term approach, the right growth funds can help investors beat inflation.
Beating inflation should be the main goal of every investor. Christopher Dillon, capital markets investment specialist at T. Rowe Price, says that “growth-oriented equity strategies, when combined with value strategies, not only provide vital diversification, but they also serve the important purpose of helping investors to earn a rate of return that exceeds general levels of inflation.” Gerry O’Reilly, principal at Vanguard Equity Index Group, also points out that “growth funds can appeal to long-term investors who are primarily looking for capital appreciation and have the risk tolerance to withstand periods of underperformance relative to the broad equity market.” Put this all together, and it’s obvious why you should hold a diversified mix of growth funds in your portfolio. As long as you have the risk tolerance to hold on, these funds can help beat inflation over the long term. Here are eight great growth funds to consider.
Alger Mid-Cap Focus (ticker: AFOZX)
Amy Y. Zhang, CFA, executive vice president and portfolio manager at Alger, says that she and her team “believe mid-caps are the best of both worlds for investors.” In her opinion, “mid-caps tend to be covered less by the street, and they offer similar growth potential to small-caps.” She says Alger’s advantage is its knack for finding mid-cap stocks undergoing “positive dynamic change,” and then “capitalizing on the change before it is recognized by the market.” Morningstar gives the fund a four out of five-star rating for past performance. AFOZX is a small fund with only $451 million in assets under management, or AUM, and an expense ratio of 0.68% — meaning you’ll pay $68 for every $10,000 invested annually.
Brown Advisory Sustainable Growth Fund (BIAWX)
According to David Powell, co-portfolio manager of BIAWX, this fund’s strategy is “to look at companies at the intersection of three characteristics: fundamental strengths, sustainable business advantages and compelling valuations.” Powell believes that this approach will allow long-term outperformance of the Russell 1000 index, which is BIAWX’s benchmark. Powell says that managers consider environmental, social and governance factors when choosing stocks for the fund. BIAWX has $5.4 billion in AUM and a 0.8% expense ratio. BIAWX holds a five-star rating from Morningstar analysts, as it outperformed other funds in its category by 9.4% in 2021.
Harbor Capital Appreciation Fund (HACAX)
HACAX is a growth fund focused mostly on large-cap companies in the information technology, consumer discretionary and health care sectors, with big names such as Tesla Inc. (TSLA), Apple Inc. (AAPL) and Microsoft Corp. (MSFT) topping its list of holdings. Ross Frankenfield, managing director of investments at Harbor Capital Advisors, believes that this fund’s strategy “can help investors reach their growth goals by providing exposure to a portfolio of companies that are driving innovation and technological change within our economy.” HACAX has a three-star rating from Morningstar. The fund has $22.4 billion in AUM and an expense ratio of 0.65%.
T. Rowe Price Blue Chip Growth Fund (TRBCX)
Russ Kinnel, director of manager research at Morningstar, points out that TRBCX is similar to HACAX in that both funds will be investing in a lot of well-known, large-cap tech names such as Microsoft, Amazon.com Inc. (AMZN), Alphabet Inc. (GOOG, GOOGL). Adam Sabban, senior analyst at Morningstar, says that “the strategy’s recent results have underwhelmed, but it has the pedigree and tools needed to perform better.” Morningstar gives the fund three stars. TRBCX has $63.1 billion in AUM, and it carries a 0.69% expense ratio.
Loomis Sayles Small-Cap Regional Growth Fund (LCGRX)
As a small-cap fund, LCGRX focuses on companies with market caps between $300 million and $2 billion. This means the fund’s top holdings are often off-the-beaten-path, lower-volatility offerings like tech and services company KBR Inc. (KBR), health care company Evolent Health Inc. (EVH), medical facility provider Option Care Health Inc. (OPCH), waste management company Casella Waste Systems (CWST) and industrial equipment provider Advanced Drainage Systems Inc. (WMS). LCGRX is rated three stars by Morningstar. The fund has $2 billion in AUM, and it has an expense ratio of 1.17%.
PrimeCap Odyssey Growth Fund (POGRX)
Kinnel says he believes POGRX is “possibly the best growth fund out there.” While Robby Greengold, strategist at Morningstar, echoes that sentiment when he says, “the fund boasts a solid long-term track record.” Greengold adds that “the team’s ability to assess individual companies” helps them “find underestimated or overlooked value.” POGRX is a Morningstar-rated three-star fund. Greengold’s comments explain this performance-based rating when he says that “the fund’s picks have hurt over the past three years … as a variety of its biotech and airline holdings have sustained significant paper losses.” However, POGRX does earn Morningstar’s highest forward-looking rating, meaning the fund has a good outlook once the market heads back into bull territory. POGRX has AUM of $7 billion and a 0.65% expense ratio.
T. Rowe Price Global Growth Stock Fund (RPGEX)
Kinnel likes this fund because it has a “global mandate.” As Kinnel points out, “there are a lot of good companies outside the U.S.,” and it makes sense to Kinnel to allow qualified fund managers to invest wherever solid growth might be occurring. Matthew Wilkinson, senior analyst at Morningstar, says RPGEX receives “top marks all around.” RPGEX is a Morningstar-rated four-star fund. The fund has $1 billion in AUM and an expense ratio of 0.82%. This higher expense ratio is simply because, as Kinnel points out, the fund has “a lot of turnover” due to the fact that Fund Manager Robert Scott Berg “is a little more of a trader.”
T. Rowe Price Mid-Cap Growth Fund (RPMGX)
Another mid-cap growth fund like AFOZX, the RPMGX portfolio management team says their “portfolio typically has lower volatility than our benchmark and peers, and we believe it’s well positioned to provide attractive long-term risk-adjusted performance over full market cycles.” In fact, Sabban calls RPMGX “a time-tested winner” that has a “highly accomplished manager, strong supporting analysts and disciplined investment approach.” Put that all together, and you’ll see why Morningstar gives RPMGX four stars. RPMGX has $27.4 billion in AUM, and it carries a 0.72% expense ratio.
8 best growth funds to buy and hold:
— Alger Mid-Cap Focus (AFOZX)
— Brown Advisory Sustainable Growth Fund (BIAWX)
— Harbor Capital Appreciation Fund (HACAX)
— Loomis Sayles Small-Cap Regional Growth Fund (LCGRX)
— PrimeCap Odyssey Growth Fund (POGRX)
— T. Rowe Price Blue Chip Growth Fund (TRBCX)
— T. Rowe Price Global Growth Stock Fund (RPGEX)
— T. Rowe Price Mid-Cap Growth Fund (RPMGX)
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Update 07/15/22: This story was published at an earlier date and has been updated with new information.