A mutual fund that invests in the shares of growth company stocks is called an aggressive growth fund. Companies with a lot of growth potential but also a lot of danger are used as investments in these funds. As a result, bold growth funds try to get above-average returns from the market. However, their core investments are often risky, which makes the share prices of these funds very unpredictable.
KEY TAKEAWAYS
- A bold growth fund invests in companies that have a lot of room to grow, like new companies or companies in hot parts of the economy.
- So, these funds have to be carefully handled to get above-average results when the market is going up.
- But these stocks are also a lot riskier than other stocks, so these funds may not do as well when the market is down and be more volatile overall.
Understanding Aggressive Growth Funds
Investors who are willing to take on more risk can get above-average results from aggressive growth funds, according to the market. They should do better than standard growth funds because they put more money into companies they think will grow quickly.
Aggressive growth funds participate in growth stocks that are expected to bring in more money and make more money than the average growth stock. Because bold growth stock funds spend based on theories about the future and different growth stages, they can have more risk than other funds.
Most of the time, mutual fund study providers do not put these funds into a normal category grouping. Most of the time, you’ll find them in the group of growth funds, with names like bold growth fund, capital appreciation fund, or capital gain fund. Their main goal is to spend to get better returns on their money.
Since these funds usually have high risk and high return, buyers need to look closely at the risk measures of the funds. Beta, Sharpe Ratio, and standard deviation are three measures of risk that a fund company often gives to clients to help them understand the risks of the fund.
Most of the time, the best way to understand fund risks is to compare the risk measures to a baseline. When buyers think about bold growth funds, the Russell 3000 Growth measure is a good market measure to use as a standard.
Some of the biggest possible returns in the stock market can be found in aggressive growth funds, but they also have some of the highest risks. Some bold growth funds may use swaps as part of their different investment plans. Investors should do a lot of research on these funds to learn about their investments and how they make investments.
Example of a fund that tries to grow quickly
One example of an aggressive growth fund is the ClearBridge Aggressive Growth Fund (Ticker: SHRAX), which can be bought by both individual and business buyers. As of March 2022, the Fund had $5.7 billion in assets and a return of -8.7% for the year so far, which was lower than its target, the Russell 3000 Growth Index, which had a return of -9.25%.
The fund is riskier than normal because its beta is 0.68, its Sharpe Ratio is -0.44, and its standard deviation is 14.07. It has a cost-to-income ratio of 1.11% because it is managed by a team.
Growth on the Right
Conservative growth is an alternative financial plan that aims to grow spent cash over the long term. Most of the time, these funds are for long-term buyers who care a lot about keeping their money safe but also want to take advantage of some of the market’s high growth possibilities. Most of the money in conservative growth funds is invested in fixed income. The rest of the money is put into growth or bold growth stocks.
