Best Growth Funds for UK Investors

The UK’s investment landscape is brimming with funds targeting substantial returns through capital appreciation.

Identifying the top performers, however, requires sifting through a myriad of choices.

In this article, I spotlight the best growth funds in the UK, focusing on their strategies, past performance, and potential for future returns. Join me as we navigate the promising realm of UK growth funds.

10 Best Performing Growth Funds UK

Growth ETFs give investors exposure to a broad basket of publicly traded companies with above-average growth. Hallmarks of growth stocks include lofty valuations and rapid expansion in earnings, sales, and cash flows.

For over a decade, growth investing strategies have delivered market-beating returns. But growth stocks have lost some allure amid rising rates and runaway inflation.

The future is always uncertain, but if our inflation-battered outlook shifts, growth investments could once again outperform.

Our selection of premier growth ETFs spans a range of growth approaches, from large-cap to small-cap growth, and beyond.

Any type of investor is likely to find a fitting growth stock ETF among these picks.

I’ve also included top-performing mutual funds for growth stocks.

1. Vanguard

With over $7 trillion in assets under management, Vanguard is one of the largest and most reputable fund providers. The company offers a suite of actively and passively managed growth funds suitable for various investment objectives.

Vanguard Growth Index Fund (VIGAX)

• Passively tracks the CRSP US Large Cap Growth Index
• Provides broad exposure to large-cap US growth stocks
• Ultra-low expense ratio of 0.04%
• Returned over 11% annually over the past decade

Vanguard Strategic Equity Fund (VSEQX)

• Actively managed by Vanguard’s Equity Investment Group
• Invests in US large-cap stocks with growth characteristics
• Historically has outperformed its benchmark index by 1%+
• Competitive 0.27% expense ratio
• Minimum $3,000 investment

Vanguard Health Care Fund (VGHCX)

• Focuses on healthcare stocks expected to deliver high growth
• Managed by veteran sector specialists Jean Hynes and Wellington Management
• Top holdings include UnitedHealth and Eli Lilly
• 5-star Morningstar rated
• $3,000 minimum investment

Vanguard’s scale, experience, and low costs make it a leading choice for growth fund investors. Consider one of their proven index or active growth funds.

2. Invesco

Invesco offers a diverse lineup of growth-oriented mutual funds managed by seasoned investment professionals. Here are some of their standout actively managed growth funds:

Invesco Growth Fund (IVGSX)

• Invests in undervalued large US companies with growth characteristics
• Managers seek overlooked growth stocks trading at reasonable valuations
• Top holdings include Microsoft, Amazon, and UnitedHealth
• 10-year average annual return exceeding 11%
• 0.63% expense ratio

Invesco Global Growth Fund (GGIFX)

• Invests in high-quality international growth companies of all sizes
• Managers perform rigorous bottom-up analyses seeking durable growers
• Heavily invested in consumer, health care, and technology stocks
• Low turnover indicative of long-term approach
• $1,000 minimum initial investment

Invesco Small Cap Growth Fund (GTSAX)

• Focuses on small US growth companies in the early stage of their lifecycles
• Experienced portfolio team with deep expertise in small-caps
• A rigorous fundamental research process identifies emerging leaders
• Top holdings include Axon Enterprise and Dynatrace
• $1,000 minimum initial investment

Invesco’s seasoned investment teams, rigorous research, and competitive fees make their growth funds strong options for 2023.

3. iShares Morningstar Mid-Cap Growth ETF (IMCG)

For investors seeking a low-cost passive growth fund, the iShares Morningstar Mid-Cap Growth ETF is a compelling option.

• Tracks the Morningstar US Mid Cap Broad Growth Index
• Provides diversified exposure to high-quality mid-cap US growth stocks
• Top holdings include Catalent, Trade Desk, and Ceridian HCM
• Ultra-low 0.04% expense ratio
• Outperformed similar mid-cap growth ETFs over the past 3 years
• No minimum investment makes it accessible

As an index ETF, IMCG follows a transparent rules-based methodology rather than active stock picking. However, its tracking index applies quality screens focusing on sustainably growing mid-caps.

With its combination of diversification, low cost, liquidity, and long-term outperformance, IMCG warrants consideration as a core holding in a growth-oriented portfolio. The ETF structure also provides tax efficiency.

4. Nuveen ESG Large-Cap Growth ETF (NULG)

For investors who want exposure to growth stocks aligned with environmental, social, and governance (ESG) principles, the Nuveen ESG Large-Cap Growth ETF is a leading choice.

• Tracks an ESG-screened index of large-cap US growth stocks
• Holdings meet criteria related to carbon emissions, workplace diversity, governance practices
• Top positions include Microsoft, Nvidia, Visa, and Procter & Gamble
• Returned over 13% annually over the past 3 years
• Ultra-low 0.15% expense ratio
• No minimum investment required

With its ESG screening methodology, NULG allows investors to build principled growth-focused portfolios. Its holdings represent companies with high ESG standards relative to sector peers.

NULG provides an accessible, transparent, and cost-effective option for participating in the growth potential of conscientious large-cap companies. The fund structure is tax-efficient as well.

5. American Funds Washington Mutual Fund (WSHFX)

With an impressive long-term track record spanning over 60 years, the American Funds Washington Mutual Fund remains a strong actively managed growth fund option in 2023.

• Invests primarily in dividend-paying US stocks with growth characteristics
• The portfolio manager has managed the fund since 2002
• Among the top 3% of large growth funds based on risk-adjusted returns
• Delivered over 11% average annual return for the past 20 years
• Lower than average 1.04% expense ratio
• $250 minimum initial investment

Washington Mutual’s experience, rigorous stock selection process, long-term focus, and competitive fees make it a compelling choice. The fund has consistently outperformed its benchmark and category peers over time.

The fund’s bias towards consistent growers paying dividends adds an element of stability as well. While requiring a buy-and-hold mentality, Washington Mutual has more than rewarded patient investors over the decades.

6. Thrivent Mid Cap Stock Fund (TMSIX)

For investors seeking a seasoned actively managed mid-cap growth fund, the Thrivent Mid Cap Stock Fund is a strong choice.

• Invests in mid-sized US companies with above-average growth potential
• Portfolio managers boast over 20 years of experience together
• Rigorous fundamental research and valuation process
• Top holdings include Catalent, West Pharmaceuticals, and Motorola
• Delivered 13% average annual return over the past decade
• Reasonable 0.86% expense ratio
• $2,000 minimum investment

Thrivent Mid Cap Stock leverages the specialised expertise and collaborative approach of its experienced management team. Their disciplined stock selection has led to category-beating returns over full market cycles.

The fund maintains a diversified portfolio not overexposed to any single sector or industry. This provides some stability amidst its pursuit of disruptive mid-cap growth companies.

Overall, Thrivent Mid Cap Stock warrants consideration for the core mid-cap growth allocation in an investor’s portfolio. Its manager tenure, research process, performance record, and accessibility make it enticing.

7. Direxion NASDAQ-100 Equal Weight ETF (QQQE)

For exposure to the technology giants of the NASDAQ-100 on an equal-weight rather than market-cap basis, QQQE is compelling:

• Holds the 100 largest non-financial stocks listed on the NASDAQ
• Applies equal weights to each holding, avoiding concentration risk
• Top holdings include Amgen, Costco, Kraft Heinz, and Starbucks
• Provides a more diversified take on the NASDAQ-100
• Low 0.35% expense ratio
• Delivered 25%+ returns in 2021

While past performance is no guarantee, QQQE offers a more balanced approach to tapping into the powerful earnings growth of major innovative companies like Apple, Microsoft, and Amazon.

The equal-weight methodology reduces concentration risk and diversifies across sectors and market caps. For technology-focused growth investors, QQQE warrants consideration as a NASDAQ-100 fund alternative.

8. MFS Blended Research International Equity Fund (BRXAX)

For investors seeking international growth exposure beyond US borders, the MFS Blended Research International Equity Fund is a compelling actively managed option.

• Invests in non-US growth stocks of all market caps
• Combines proprietary fundamental and quantitative research
• Portfolio managers have two decades of experience together
• Top country holdings include China, India, Japan, and Taiwan
• Returned over 9% annually over the past decade
• Reasonable 0.98% expense ratio
• $1,000 minimum initial investment

MFS applies thorough boots-on-the-ground company research globally to identify overlooked growth opportunities. This high-conviction approach has led to outstanding long-term results.

The fund holds both household technology names like ASML and Tencent along with lesser-known small-cap growers. Its flexibility across countries and market caps provides an attractive growth profile.

For investors wanting professional active management of international growth equities, MFS Blended Research International Equity warrants strong consideration given its experience and results.

9. TIAA-CREF Social Choice Growth Fund (TSORX)

For a growth fund aligning investments with ethical principles, the TIAA-CREF Social Choice Growth Fund is worth considering:

• Invests in companies meeting environmental and social responsibility criteria
• Screens holdings on ESG factors like carbon emissions and labor practices
• Actively managed by a veteran PM with deep experience in responsible investing
• Top US holdings include Microsoft, Apple, and Alphabet
• 10-year annualised return over 12%
• Below average 0.35% expense ratio
• $2,500 minimum initial purchase

TSORX allows investors to participate in growth while supporting companies that score highly on critical ESG metrics versus industry peers. Its ESG focus provides a principled approach.

The fund has delivered outstanding historical results, showing no performance sacrifice from its values-based methodology. In total, TSORX provides compelling ESG-conscious growth exposure.

10. JPMorgan Income Fund (JGIAX)

For investors seeking an actively managed bond fund delivering consistent income, the JPMorgan Income Fund is a leading choice:

• Invests primarily in high-quality short-term US corporate and government bonds
• Managers utilise macroeconomic analysis to position for changing rate environments
• The portfolio has an average duration of 2.5 years, limiting interest rate risk
• The fund boasts an impressive track record since 1977
• Delivered over 5% annual income distributions over the past decade
• Reasonable 0.79% expense ratio
• $1,000 minimum initial investment

JPMorgan Income provides broad exposure to short-term investment-grade bonds, allowing investors to participate in bond market income. Its conservative approach focuses on high-quality issuers and managing duration.

The fund’s experienced managers actively adjust the portfolio as rate conditions shift, defending against rising interest rates. This protection has supported consistent investor income over multiple decades.

For bond investors who place income and capital preservation over price appreciation, JPMorgan Income is a prudent choice backed by its long-term track record of success.

How to Invest in Growth Funds

The universe of high-caliber growth funds and ETFs is vast. Here we focus on options rated Silver or higher by Morningstar analysts, spanning categories like U.S. large-cap growth, mid-cap growth, and small-cap growth.

Signing up takes 10 minutes or less in most cases. Some providers may require extra steps before investing, like a risk tolerance quiz or an overview of the stock market (for beginners).

Choose a Provider

Once you’ve decided to invest in growth funds, the next step is selecting an investment platform or provider to facilitate your investments.

Here are some things to consider:

• Fees and expenses – Compare management fees, account fees, and trading commissions across providers. Lower costs improve returns.
• Range of funds – Look for a wide selection of growth funds from different fund companies and managers. This provides more diversification options.
• Research and tools – Seek platforms that offer growth fund screeners, analysis, news, and education to inform your picks.
• Account types – Ensure the provider offers tax-advantaged accounts like ISAs and pensions to maximise your savings.
• Platform ease of use – The website and apps should make finding, researching, and trading growth funds simple and intuitive.

Established UK stock brokers like Hargreaves Lansdown, AJ Bell, and interactive investor offer a robust range of growth funds to suit different risk appetites and investment horizons. Comparing costs, offerings, and features will help determine the best fit.

Submit Personal Details

After selecting a growth fund provider, the next step is setting up your investment account by submitting some personal details.

The provider will need information like your name, contact info, date of birth, occupation, income source and amount, and tax residency status.

This info is required for regulatory and compliance purposes, to verify your identity, assess your financial situation, and determine your eligibility for certain account types.

The provider will also ask about your investment objectives, like prioritising capital growth, income, or preserving wealth. Your time horizon for achieving goals is also relevant.

Additionally, a risk assessment helps gauge your risk tolerance. A short questionnaire determines whether you are conservative, moderate, or more aggressive in your comfort with investment volatility.

Providing accurate details enables opening an account optimised for your growth investing goals, timeline, and risk appetite. The information is also necessary from a legal standpoint for the provider to offer financial services.

Let the Verification Process Complete

After submitting your personal details, growth fund providers will initiate a verification process to validate your identity and eligibility.

This “Know Your Customer” (KYC) process typically involves:

• Confirming your name, age, address, and other identifying information
• Checking backgrounds using third-party data sources
• Ensuring you meet requirements to open your desired account types
• Validating funding sources like bank accounts through micro-deposits
• Screening against compliance watchlists like for politically exposed persons (PEPs)

The provider may contact you for any clarification needed during verification. Be responsive to requests to help complete the process smoothly.

Full verification can take a few business days in most cases. Be patient as the provider completes the necessary diligence to comply with anti-money laundering and other regulations.

Once verified, you will receive confirmation that your account is opened and ready to be funded. Then the investing can begin!

Select One of the Top Growth Funds on My List

With your investment account opened and verified, it’s time to select your first growth fund to invest in from the platform’s offerings.

Review our recommended list of top-rated growth funds across categories like:

• Aggressive growth – Higher risk, higher potential reward funds in emerging markets or specific sectors
• Core growth – Broadly diversified funds investing in companies with above-average growth
• Global growth – Funds focused on fast-growing companies worldwide
• Small-cap growth – Funds targeting smaller, higher growth potential companies

Compare historical returns over 10+ years, expense ratios, fund manager tenure, minimum investments, risk metrics, and other details.

For beginning growth investors, a core growth fund from an established provider like Fidelity or Vanguard can provide a solid foundation. Core growth funds hold blue chip stocks expected to deliver moderately high growth.

Look for options with strong long-term returns, experienced managers, competitive fees, and risk profiles aligning with your objectives. Focus on consistent, long-term performance rather than chasing unsustainable hot streaks.

The Essence of Growth Investing

Growth investing aims to achieve capital appreciation by identifying and investing in companies exhibiting faster-than-average growth in revenues, earnings, and cash flows compared to broader markets.

These businesses possess high expansion potential.

Rapidly growing firms often direct profits back into enhancing operations, pursuing mergers and acquisitions, or developing new products and markets. This reinvestment can spur gains but limits dividends.

The upside of growth stocks is the opportunity for substantial price increases. However, the risk is also higher since future profit growth is uncertain.

Growth companies often have high valuations that can contract quickly if growth stalls. Volatility is generally higher.

Growth stocks tend to perform well during economic expansions coupled with low interest rates. For example, US growth stocks saw tremendous gains for over a decade after the 2008 financial crisis as rates fell.

But with inflation recently surging and rates rising, the tailwinds have shifted. Higher rates make safe fixed income relatively more attractive, weighing on growth stock multiples.

Demystifying Large-Cap Growth ETF Investing

Large-cap growth ETFs offer investors exposure to the stocks of bigger, established companies exhibiting strong earnings and revenue expansion.

These funds track indices selecting stocks according to growth factors like sales and profit growth rates, pricing trends and gross margin expansion, new addressable market opportunities, innovation pipelines, and R&D investments.

Some large-cap growth ETFs also apply value criteria, seeking reasonably priced fast growers rather than overextended momentum stocks.

These funds encompass a range of strategies and focus areas: broad growth ETFs holding hundreds of stocks, and concentrated ETFs with major allocations to a few top names.

Strategic ETFs focus on specific sectors or factors; and active ETFs where managers pick stocks.

Large-cap growth ETFs tend to hold companies with market values between $40 billion and $400 billion. The collection of stocks and average weightings impact an ETF’s risk-return profile.

In summary, large-cap growth ETFs provide diversified access to the stocks of larger companies poised for above-average expansion. Tailoring your allocation to strategic funds can optimise growth potential.

FAQs

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Please note:

This content is for informational purposes only and does not constitute financial advice. Investments carry risks, and past performance does not guarantee future results. Always conduct your own research and consider seeking financial advisory services.