Aggressive growth funds become a natural choice for investors who are ready to take risks to enjoy the chance of high capital appreciation. Luckily in the first quarter, aggressive growth funds have had an encouraging rally. The best gains for an Aggressive Growth in Q1 was nearly 10%, which was significantly higher than the Growth fund category returns, be it large, mid or small-cap growth funds.
The gains have come in a quarter that was not about robust surge. Markets witnessed choppy trading sessions during Q1 2015 as investors grappled with concerns related to lower global growth projections, a slump in oil prices, strengthening dollar and apprehensions about the timing of the Fed interest rate hike. The World Bank reduced its global economic growth outlook for 2015 and 2016. The Dow (DIA) snapped a three-quarter winning streak and declined 0.3%. The S&P 500 (SPY) and Nasdaq (QQQ) gained 0.4% and 3.5%.
For the mutual funds, Lipper said the average diversified US stock mutual funds returned 2.5% in Q1, while international funds gained 4.5%. On the other hand, growth funds had a decent Q1, beating in almost all cases the returns of Value and Blend funds.
Aggressive Growth Funds
Focusing on Aggressive Growth funds only, investors looking for the highest capital gains should look no further than investing in aggressive growth mutual funds.
These funds invest in companies that show high growth prospects, but that comes with the risk of share price fluctuations. This category of funds also invests heavily in undervalued stocks, IPOs and relatively volatile securities in order to profit from them in a congenial economic climate. Securities are selected on the basis of their issuing company’s potential for growth and profitability.
This category of instruments has a strong positive correlation with market movements and provides good returns during a market upswing. Such performance is achieved by investing in securities issued by companies with strong growth potential and in IPOs which are often resold quickly at a handsome profit. Many aggressive growth mutual funds may also invest in options to achieve their goal of high returns.
