Aggressive growth funds are considered one of the best investment options for risk-taking investors in search of a high level of capital appreciation. Luckily, in 2016, aggressive growth funds experienced an encouraging rally backed by major events that mostly left a positive impact on markets.
After the early blues from slowing growth in China's economy as well as "Brexit", which occurred in mid-2016, the markets put up a decent show. Some of the key factors that contributed to strong yearly gains for major benchmarks were the Trump-induced rally, Fed's rate hike, an improved domestic economy and the oil price rally.
Markets Posted Yearly Gains
The three major benchmarks, the Dow, the S&P 500 and the Nasdaq climbed 13.4%, 9.5% and 7.5%, respectively, in 2016. Encouraging economic data and Donald Trump's surprise victory were some of the key catalysts for these gains. Trump's promises during his campaign, which include deregulation, tax cuts and expansionary infrastructure spending led investors to believe that his presidency will give a significant boost to the U.S. economy.
Further, the Fed raised rates for the second time in a decade last December and indicated a faster pace of rate hikes this year, which boosted markets further. Also, the crude output cut agreement by major oil producing nations lifted investor sentiment.
Aggressive Growth Funds
Given such a favorable economic climate, investors seeking a high level of capital growth should look no further than investing in aggressive growth mutual funds. These funds invest in companies that show high growth potential, but this comes with the risk of share price fluctuation. This category of funds also invests heavily in undervalued stocks, IPOs and relatively volatile securities and seeks to profit from them in a congenial economic climate. Securities are selected on the basis of what in their view is a 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 that 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.
Buy These 5 Best Performing Aggressive Growth Funds
Here, we have selected five aggressive growth mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have impressive year-to-date (YTD) and one-year annualized returns. They also have minimum initial investment within $5,000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
Artisan Small Cap Investor (MUTF:ARTSX) invests a bulk of its assets in equity securities of small-cap companies. The fund focuses on companies with market-cap lower than thrice the weighted average market-cap of companies in the Russell 2000 Index.
ARTSX has an annual expense ratio of 1.25%, lower than the category average of 1.31%. The fund has YTD and one-year annualized returns of 1.9% and 16.7%, respectively.
Loomis Sayles Growth A (MUTF:LGRRX) invests in equities such as common stocks and warrants of large-cap companies. LGRRX may also invest, to a lesser extent, in small- and mid-cap companies. LGRRX invests in multiple sectors and industries.
LGRRX has an annual expense ratio of 0.92%, lower than the category average of 1.18%. The fund has YTD and one-year annualized returns of 2.8% and 16.2%, respectively.
PRIMECAP Odyssey Aggressive Growth (MUTF:POAGX) invests in U.S. companies having rapid earnings growth potential. Though POAGX invests across market sectors and market caps, it has historically invested most of its assets in mid to small-cap firms.
POAGX has an annual expense ratio of 0.63%, lower than the category average of 1.29%. The fund has YTD and one-year annualized returns of 3.1% and 25%, respectively.
American Century All Cap Growth Investor (MUTF:TWGTX) primarily invests in stocks of companies that are believed to have above-average earnings or revenues growth. TWGTX uses analytical research tools and techniques to choose growth-oriented companies with large-size market capitalization.
TWGTX has an annual expense ratio of 1.00%, lower than the category average of 1.18%. The fund has YTD and one-year annualized returns of 2.7% and 13.1%, respectively.
Meeder Quantex Retail (MUTF:FLCGX) invests more than 80% of its assets in equity securities of mid-cap companies. Mid-cap companies generally have market-cap similar to those companies in the range of the Russell MidCap Index. FLCGX also invests in exchange-traded funds (ETFs).
FLCGX has an annual expense ratio of 1.09%, lower than the category average of 1.18%. The fund has YTD and one-year annualized returns of 0.9% and 34.1%, respectively.