Investing in growth firm stocks is the primary goal of an aggressive growth fund, which is a mutual fund. These funds invest in firms with tremendous growth potential, but they also involve a higher level of risk. Due to the high volatility of their underlying assets, aggressive growth funds aim to offer above-regular market revenues.
Aggressive Growth Funds: A Guide
Investors ready to accept a higher level of risk in exchange for potentially higher returns might consider investing in aggressive growth funds. To beat ordinary growth funds, they should invest more heavily in firms that they believe have aggressive growth potential. If you're looking to invest in the stock market's fastest-growing companies, aggressive growth funds are a good fit for you. Because of its forward-looking assumptions and various development stages, aggressive growth stock funds may have a greater comparative risk. Mutual fund research firms often do not categories these funds into a specific classification. If you're looking for aggressive growth or capital appreciation funds, you'll find them under the growth category. Their primary goal is to profit by investing in high-yielding stocks and bonds.
Why Aggressive Growth Funds?
Mutual funds that focus on aggressive growth might help investors who want to see a lot of money rise in the long run. Because these funds have a large amount of exposure to firms with tremendous growth potential, they have a larger risk of volatile share price movements. As a result, these funds engage in high-risk investments, including IPOs, volatile equities, and undervalued companies. The fund managers choose portfolio firms based on profitability and future development prospects.
Investors should put money into these funds since the central bank is likely to retain interest rates at zero to assist the economy recover and driving up inflation in the foreseeable future.
Advantages of Aggressive Growth Funds
Diversification: Equities and debt are included in these funds' portfolios, providing diversification in the truest sense. For example, if the stock market goes down, you'll have a cushion to fall back on in the event of a market correction. The debt part of this money, therefore, serves a dual purpose.
Ease: With Aggressive Hybrid Funds, there is no need to purchase several separate funds to have diversified exposure to various asset classes. In addition, monitoring work is reduced since the fund manager takes care of asset allocation.
Taxation Benefit: Mutual fund schemes that invest 65 percent or more of their assets in equities or equity-related products are eligible for equity taxation under the existing Tax Laws. Investors may take advantage of equity taxation, even though the portfolio may include debt exposure of up to 35 percent of its assets.
Relatively Less Volatility: In general, aggressive hybrid funds are less volatile than pure equity funds, although this is not guaranteed. Only the portion invested in stocks would be subject to risk if the market declines in an Aggressive Hybrid fund. The portfolio's debt component would provide some cushioning.
An aggressive growth fund that both retail and institutional investors may purchase is the Clearbridge Aggressive Growth Fund (Ticker: SHRAX). In March 2020, the Fund had $6.8 billion in possessions and year-to-date performance of -3.35 percent, while its benchmark Russell 3000 Growth Index returned -3/72 percent. In terms of risk, the Fund's beta is 1.11, its Sharpe Ratio is 0.17, and its normal eccentricity is 15.55. It has an expense ratio of 1.12 percent because of its aggressive management approach.
Conclusively, an aggressive growth fund is a type of mutual fund, seeks to achieve its primary objective by investing in growth-oriented companies. These funds make investments in companies with significant growth potential, but they also carry a higher amount of risk than other funds. Because of the high volatility of their underlying assets, aggressive growth funds seek to generate returns that are higher than the market average.