Aggressive growth

What is aggressive growth?

Aggressive growth is a kind of investment fund that seeks to return the highest capital gains. These funds hold stocks of companies with potential for rapid growth.

Such funds normally deliver high returns in bull markets and deep losses in bear markets. An aggressive growth fund is designed for investors not averse to risk.

Deeper definition

An aggressive growth fund is also referred to as an aggressive allocation fund. It focuses on capital growth by investing largely in stocks.

Typically, an aggressive growth fund would have 70 to 90 percent of the fund’s assets invested in equities. By comparison, other types of funds normally include a mix of bonds and fixed-income securities such as corporate bonds or Treasuries.

Aggressive growth funds generally fall into one of two types of investments:

  • Aggressive growth mutual funds — These funds are made up of investments aimed at boosting capital appreciation by focusing on the stock of companies expected to deliver a higher growth rate than the general market.
  • Aggressive growth hedge funds — These are funds that are managed with an emphasis on equities expected to deliver strong earnings growth.

As a result, the price volatility of aggressive funds is far greater compared to their less aggressive counterparts. So, they tend to be a higher risk investment with more potential for higher returns.

Generally, an aggressive growth fund is made up of 85 percent stocks and 15 percent bonds. Below is what might be the breakdown of holdings of such a fund:

  • 30 percent large-cap stocks.
  • 15 percent mid-cap stocks.
  • 15 percent small-cap stocks.
  • 15 percent intermediate-term bonds.
  • 25 percent foreign or emerging market stocks.

Aggressive growth example

Jeff is only 32, but his job as a chemical engineer means he is paid well and can afford to take on more risk in his investing. He sticks with a mutual fund rather than picking individual stocks because he doesn’t have to do research on each of those stocks himself. He chooses an aggressive growth fund because he thinks that the economy is doing well and the long-running bull market will continue.

 

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