My only concern is if the fund has huge distribution, and keep it long enough (5+ years), I will pay lots of taxes on it, thus limiting growth potential
Do I have the right thinking?
Yes, the funds that distribute a lot of capital gains lose a lot of their return to taxes. In taxable accounts, you want your fund to never, ever, take a Short term capital gain b/c ST cap gains are taxed at your marginal tax rate, and hardly ever take Long Term capital gains.
What you'd actually like your taxable fund to do is to offset
any capital gains it must take (from selling stocks in its portfolio that have gone up in price) with capital losses (from selling stocks that have gone down in price), thereby not distributing any capital gains to you. Vanguard is especially adept at doing this in their tax managed funds. Vanguard's S&P 500 index (VFINX) and TSM index (VTSMX) have extremely low turnover, and therefore don't have to take many capital gains.
Another very tax efficient fund is Bridgeway's Blue-Chip 35 Index fund (BRLIX). It is specifically tax managed.
ETF's are also very tax efficient, however people making monthly or quarterly contributions can rack costs each time he/she purchases an ETF.