What Is an Aggressive Growth Fund?
An aggressive growth fund is a mutual fund that seeks capital gains by investing in the shares of growth company stocks. Investments held in these funds are companies that demonstrate high growth potential, but also carry greater risk. As such, aggressive growth funds seek to provide above-average market returns; however, their underlying investments are often volatile causing high share price volatility.
Key Takeaways
- An aggressive growth fund invests in companies that have high growth potential, including newer companies and those in hot sectors of the economy.
- As a result, these funds are actively managed to achieve above-average returns when markets are rising.
- These stocks, however, are also quite a bit riskier than other stocks and so these funds may underperform in down markets and experience greater volatility overall.
Understanding Aggressive Growth Funds
Aggressive growth funds are identified in the market as offering above average returns for investors willing to take some additional investment risk. They are expected to outperform standard growth funds by investing more heavily in companies they identify with aggressive growth prospects.
Aggressive growth funds invest in growth stocks with relatively more aggressive projections for revenue and earnings than the standard growth stock universe. Because aggressive growth stock funds are investing based on forward-looking assumptions and multiple growth phases, they can have higher comparable risk.
These funds typically do not fall into a standard category grouping reported by mutual fund research providers. They will typically be found in the growth fund category with fund names such as aggressive growth fund, capital appreciation fund, or capital gain fund. Their main focus is to invest for superior capital gains.
Since these funds typically are associated with high risk and high return it is important for investors to closely examine risk metrics of the funds. Beta, Sharpe Ratio, and standard deviation are three risk metrics that are often reported by a fund company to help investors understand the fund’s risks. Comparing the risk metrics to a benchmark is typically best when seeking to understand fund risks. The Russell 3000 Growth Index is a good market index benchmark for investors when considering aggressive growth funds.
Aggressive growth funds offer some of the highest return potential in the equity markets, also with some of the highest risks. Some aggressive growth funds may integrate alternative investing strategies that utilize derivatives. Investors should do thorough due diligence on these funds to understand their investments and investment strategies.
Example of an Aggressive Growth Fund
The ClearBridge Aggressive Growth Fund (Ticker: SHRAX) is one example of an aggressive growth fund available for both retail and institutional investors. As of March 2022, the Fund holds $5.7 billion in assets and had a year-to-date return of -8.7% versus a return of -9.25% for its benchmark Russell 3000 Growth Index. The fund has a beta of 0.68, its Sharpe Ratio is -0.44 and its standard deviation is 14.07 - indicating a higher than average level of risk. Due to its active management style, it has an expense ratio of 1.11%.
Conservative Growth
In contrast to aggressive growth, conservative growth is an alternative investment strategy that aims to grow invested capital over the long term. These funds typically target long-term investors who place high importance on wealth preservation but would also like to take advantage of some of the market’s high growth opportunities.
Conservative growth funds usually allocate a high percentage of the fund to fixed income while investing the remaining allocation ingrowthor aggressive growth stocks.
FAQs
The ClearBridge Aggressive Growth Fund (Ticker: SHRAX) is one example of an aggressive growth fund available for both retail and institutional investors. As of March 2022, the Fund holds $5.7 billion in assets and had a year-to-date return of -8.7% versus a return of -9.25% for its benchmark Russell 3000 Growth Index.
Which mutual fund is best for aggressive growth? ›
- Groww Aggressive Hybrid Fund Direct Growth. ...
- HSBC Aggressive Hybrid Fund Direct Plan Growth Option. ...
- Tata Hybrid Equity Fund Direct Plan Growth. ...
- Navi Aggressive Hybrid Fund Direct Growth. ...
- Sundaram Aggressive Hybrid Fund Direct Plan Growth. ...
- HDFC Hybrid Equity Fund Direct Growth Option. ...
- Union Aggressive Hybrid Fund Direct Growth.
Class A shares typically impose a front-end sales charge, which means a portion of your money isn't invested and is instead paid in part to the brokerage firm selling you the fund. Let's say you spend $1,000 to purchase Class A shares, and the fund imposes a front-end sales charge of 5 percent.
What is a growth mutual fund example? ›
A growth fund is a diversified portfolio of stocks that has capital appreciation as its primary goal, with little or no dividend payouts. The portfolio mainly consists of companies with above-average growth that reinvest their earnings into expansion, acquisitions, or research and development (R&D).
What is an example of an aggressive growth strategy? ›
A standard example of an aggressive strategy compared to a conservative strategy would be the 80/20 portfolio compared to a 60/40 portfolio. An 80/20 portfolio allocates 80% of the wealth to equities and 20% to bonds compared to a 60/40 portfolio, which allocates 60% and 40%, respectively.
What does an aggressive growth portfolio look like? ›
Investment Strategy
The Aggressive Growth Portfolio maintains a target asset allocation of 80% equity, 20% fixed income. This target asset allocation is comprised of the following Sub-asset Classes and Funds: 48% Domestic Equity, managed by The Vanguard Group, Inc.
How do you know if a mutual fund is aggressive? ›
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.
Are aggressive mutual funds safe? ›
Features of an Aggressive Fund
Portfolio of Investment: These funds have a high-risk profile due to their equity-heavy concentration. As a result, they are unsuitable for risk-averse investors. Risk: As the name says, these funds tend to be highly risky in the mutual fund environment.
Does Fidelity have an aggressive growth fund? ›
This fund is only available to individuals with Fidelity Health Savings Accounts that are connected to specific employee benefits programs.
What is a class C mutual fund? ›
Class C shares are level-load shares that don't impose a sales charge unless you sell too soon after your purchase (usually a period of a year). Instead, mutual funds charge an ongoing annual fee. C shares are probably best for short term investors of beyond one year and no more than three years.
There is no one-size-fits-all answer to which type of mutual fund is the best. The best type of mutual fund depends on your financial goals and risk tolerance. Equity funds offer growth potential, debt funds provide stability, ELSS funds offer tax benefits, and ETFs offer diversification.
What are class D mutual funds? ›
Class D mutual funds, or “no-load funds,” have no fee to buy them and no fee to sell them. There isn't a level percentage fee either. You pay only the 12b-1 fee and the annual expense ratio. That makes Class D shares far more affordable than the aforementioned classes for both for short- and long-term investment.
What are aggressive growth funds? ›
The ClearBridge Aggressive Growth Composite seeks capital appreciation by investing primarily in common stocks of companies that the manager believes are experiencing, or will experience, growth in earnings exceeding the average rate of earnings growth of companies which comprise the S&P 500 Index.
What is a mutual fund example? ›
Index funds are mutual funds that aim to replicate the performance of a market benchmark or index. For example, an S&P 500 index fund tracks that index by holding the 500 companies in the same proportions.
What type of fund is a growth fund? ›
A growth fund is a mutual fund that includes companies that are likely to have faster revenue or earnings growth than their industry peers or the overall market. Growth funds are divided into small-, mid-, and large-cap categories.
What is considered an aggressive stock? ›
An aggressive stock is a higher-risk investment that can potentially produce higher returns than more conservative stocks, but also has equal potential for bigger losses. Examples of aggressive stocks would include junior mining stocks, smaller technology stocks, and penny stocks.
What is an aggressive allocation mutual fund? ›
Aggressive-allocation portfolios seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. These portfolios tend to hold larger positions in stocks than moderate-allocation portfolios.
What is an example of a high growth stock? ›
A good way to wrap your head around growth stocks is to consider the so-called “Magnificent Seven,” a group of large-cap growth stocks that includes Microsoft, Apple, Alphabet (parent company of Google), Amazon, Nvidia, Meta Platforms (parent company of Facebook) and Tesla.
