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The Best Growth Funds for 2022

These growth-focused funds all earn Morningstar Analyst Ratings of Silver or better.

For the new list of Morningstar’s top growth ETFs and funds, read our latest edition of “The Best Growth Funds.”

For many investors, there are few reasons to be examining growth funds today. Investors who own core stock mutual funds or exchange-traded funds--especially those tracking a broad market index such as the S&P 500 or Wilshire 5000--already have exposure to growth stocks. They’re diversified. It’s unlikely they need to add more growth to their portfolios--they already have plenty.

Moreover, if you've been using discrete funds for your growth and value exposures, your once-balanced style portfolio is likely out of whack. It is probably growth-heavy after that style's extended period of outperformance: Despite value's recent outperformance, the Morningstar US Growth Index has outrun the Morningstar US Value Index by 13 full percentage points annually during the past five years.

However, you may be among those who think growth stocks are the place to be, and you’d like to tilt your portfolio toward that style. If that sounds like you, read on. And if not, you can always bookmark this article for a future time when you are in the market for a solid fund.

There are many fine growth funds and ETFs to choose from. Today, we're examining those that land in the U.S. large-growth, mid-growth, or small-growth Morningstar Categories and earn Morningstar Analyst Ratings of Silver or better. (We expect such highly rated funds to outperform over a full market cycle.)

For most investors, your search can begin and end in the large-growth category. The chart below includes all mutual funds and ETFs in the large-growth category with at least one share class that earns an Analyst Rating Gold or Silver.

Managers plying growth strategies covet growth over price--they’re less concerned about finding bargains than their value counterparts. As with any type of fund, though, don’t over-rely on a fund’s category placement to tell you everything you need to know.

There's a good deal of variety among strategies in the large-growth category. And these various approaches can lead to different performance and risk profiles.

Most funds in this camp focus on earnings growth. To invest in a company, they demand that a company's earnings growth exceeds that of the market. Within this subset, some managers practice a momentum strategy, which pretty much ignores a stock's price and instead focuses on companies with accelerating earnings whose stocks are already on the upswing--the idea being that stocks that have outperformed will continue to do so, at least in the short run. Other managers are willing to invest in stocks without any earnings; they're focused instead on revenue growth, with the hope that earnings will eventually follow. Other funds focus on stocks with more moderate, but steady, earnings growth. These funds tend to boast portfolios of steady-growing and more reasonably priced blue-chip stocks.

Other differences exist, too. For example, a few funds on the list, such as Loomis Sayles Growth LGRNX, have compact portfolios consisting of fewer than 40 securities, while others--such as Fidelity Contrafund FCNTX and many of the passive choices on the list--own upward of 300 stocks.

Speaking of passive funds: Even the index funds in this category take slightly different approaches. For instance, Vanguard Growth ETF VUG targets the faster-growing half of the U.S. large-cap market. However, it extends its reach further down the market-cap ladder and offers a broader portfolio than sibling Vanguard Mega Cap Growth ETF MGK.

As an aside, funds that focus on popular strategies (such as growth today) or less liquid markets (such as small companies) sometimes stop accepting new money so that they can continue to effectively invest within their wheelhouses; check the fund's "status" field on its quote page to find out if a fund you're interested in is open to new investment.

The bottom line: Do your research before you buy. Our investment categories and Analyst Ratings are just a starting point.

While most investors will likely be able to find a strategy that suits their needs in the large-growth category, those with a greater risk tolerance may choose to move down the market-cap ladder and explore smaller companies. The table below includes the mutual funds and ETFs in the mid-cap growth and small-cap growth categories that earn Gold or Silver ratings.

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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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