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Aggressive Growth Fund (Aggressive Allocation)

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Moneyzine Editor
1 mins
January 4th, 2024
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Aggressive Growth Fund (Aggressive Allocation)

Definition

The term aggressive growth fund refers to a portfolio of securities that attempts to maximize capital appreciation. There is a risk-reward trade off when investing in an aggressive growth fund; the greater returns associated with these funds means the investor is willing to accept more risk too.

Explanation

Also known as aggressive allocation and a capital appreciation fund, an aggressive growth fund is one that focuses on capital growth by investing primarily in equities. While most funds will typically include a mix of equities, bonds, and fixed income securities, an aggressive growth portfolio might have 70% to 90% of the fund's assets invested in equities. Generally, these funds fall into one of the following two investment types:

  • Aggressive Growth Hedge Funds: includes a management team that primarily focuses on equities expected to provide investors with above average earnings growth.

  • Aggressive Growth Mutual Funds: includes investments that attempt to maximize capital appreciation by focusing on companies expected to have high rates of growth.

There is a risk-reward trade off when investing in aggressive growth funds and individuals with low risk tolerance scores might want to avoid these types of investments. For example, the price volatility of these funds is much higher than less aggressive investments. These funds also tend to do better when an economy is growing. In the same way, these funds will provide relatively low returns when there is an economic downturn.

Related Terms

  • The term hedge fund refers to an investment and business structure that pools capital from individuals and invests in a variety of securities. The objective of a hedge fund is to provide investors with above average returns by assuming above average risk.
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  • The term value fund refers to a portfolio of stocks that are deemed to be undervalued by the market. The objective of a value fund includes not only providing investors with capital appreciation, but also a steady stream of dividends.
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  • Blend Funds (Hybrid Funds)
    The term blend fund refers to a portfolio of securities that include both growth stocks as well as equities deemed to be undervalued by the market. The objective of a blend fund is to provide investors with higher than average capital appreciation.
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  • The term vulture fund refers to a portfolio of investments that specialize in holding the securities of financially distressed organizations. Vulture funds provide their investors with higher than average yields by purchasing securities at depressed prices.
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  • Growth Funds
    The term growth fund refers to a portfolio of stocks that are expected to provide above average earnings or revenue growth. The same equities that provide growth funds with the potential for higher than average returns will also have above average risk.
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  • Family of Funds (Mutual Fund Family)
    The term family of funds refers to the range of mutual funds offered by a single management company. Typically, a company's family of funds will provide individuals with the ability to select from a wide array of investment objectives.
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