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.
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.
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.
AFIFX is often the most aggressive of the American funds, yet it's still slightly less volatile than the S&P 500. The fund has topped the index by an average of 76 basis points (a basis point is one one-hundredth of a percent) per year over the past 15 years.
Aggressive funds are the ones where the selection of the investment portfolio is not risk-averse. Instead, the portfolio under these funds is focused on high-risk underlying assets to achieve higher capital gains.
A mutual fund's level of risk is determined by the investments it makes. Typically, the risk will increase as the potential returns do. For instance, an equity fund is typically riskier than a fixed income fund because stocks are typically riskier than bonds.
Seeks to provide capital appreciation, investing assets into two Vanguard stock index funds (60% of assets allocated to the Vanguard Institutional Total Stock Market Index Fund and 40% to the Vanguard Total International Stock Index Fund).
An aggressive investment portfolio, generally, is more weighted toward stocks (e.g. think 50% of your nest egg is invested in stocks). An aggressive portfolio may suit investors who feel they can handle a few bear markets in exchange for the possibility of overall higher returns.
Small- and Micro-Cap Stock Investing. A portfolio's weight of high-risk asset classes such as stocks and equities tend to determine if it's an aggressive portfolio. ...
Growth funds fall within three general categories of market capitalization: small-cap (invests in companies with market caps up to $1 billion); mid-cap (invests in companies with market caps of $1 billion to $5 billion), and large-cap (invests in companies with market caps of more than $5 billion).
The Aggressive Growth Strategy follows a focused, high-conviction approach, emphasizing stocks across market capitalizations with sustainable earnings and cash flow growth. As long-term business owners, the portfolio managers expect to hold companies for many years to allow for compounding of earnings and cash flows.
For example, if the average tech stock is currently growing at an expected earnings per share of 4% over the next five years, a tech company expected to grow at an 8% rate over the same period would be considered for inclusion in a growth fund.
Introduction: My name is Fr. Dewey Fisher, I am a powerful, open, faithful, combative, spotless, faithful, fair person who loves writing and wants to share my knowledge and understanding with you.
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