Aggressive growth funds are considered to be one of the best investment options for risk-taking investors in search of a high level of capital appreciation. Luckily, in the past few months, aggressive growth funds have experienced encouraging growth backed by the Trump induced rally.
Investors and market watchers are now assessing recent gains and wondering whether the market’s successful run will continue in March. With Trump confirming his pro-growth stance, investing in aggressive growth funds will be a wise investment choice.
Markets Post Remarkable Gains
President Trump is expected to repeal the Affordable Care Act, introduce new tax relief and push for infrastructure spending of $1 trillion, which in turn have led investors to believe that his presidency will give a significant boost to the economy. The three major benchmarks, the Dow, the S&P 500 and the Nasdaq climbed 4.8%, 3.7% and 3.8%, respectively, last month.
Further, Fed Chairwoman Janet Yellen indicated that a rate hike was likely in the near future. In her first day testimony before Congress in February, the Fed Chief adopted a hawkish tone. Yellen hinted that there was the possibility of a rate hike as early as the central bank’s next policy meeting this month. The Fed Chair is expected to throw more light on this issue over the next few days.
More Upside in March?
According to data from broker-dealer LP Financial, the S&P 500 gained 2.7% during 2007-2016, which means that it has been the best performing month on the basis of average returns. In contrast, January has been the worst performer over the same time period, losing 1.7% on an average.
However, this January, the S&P 500 has actually gained 1.8%. February’s performance has been even better for the benchmark index. After two back-to-back months of gains this year, S&P 500 is expected to maintain this winning streak even this month. (Read More: 4 Winning Stocks to Boost Your Gains in March)
Aggressive Growth Funds
Given such a favourable 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. The securities are selected on the basis of a company’s potential for growth and profitability.
The overall performance of growth funds in the last three months has been quite strong. Growth funds in the three market-cap categories- large-cap, mid-cap and small-cap gave respective returns of 8.1%, 6.6% and 5.3%.
Buy These 5 Best Performing Aggressive Growth Funds
Aggressive growth funds generally invest in small- and mid-cap companies which have ample scope to grow over time. In this scenario, we have selected five aggressive growth funds that have a Zacks Mutual Fund Rank #1 (Strong Buy). These funds also have impressive one-month and three-month returns. Also, these funds have a low expense ratio and their minimum initial investment is within $5000.
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.
Putnam Small Cap Growth A (PNSAX - Free Report) invests in common stocks of companies having market capitalizations within the range of the Russell 2000 Growth Index. This fund has one-month and three-month returns of 2.9% and 4.9%, respectively. It has an expense ratio of 1.22% as compared to the category average of 1.32%.
VALIC Company II Mid Cap Growth (VAMGX - Free Report) invests the large chunk of its assets in equity securities of companies having market capitalizations similar to those listed in the Russell Midcap Index. This fund has one-month and three-month returns of 4.2% and 7.2%, respectively. It has an expense ratio of 0.84% as compared to the category average of 1.29%.
T. Rowe Price QM US Small-Cap Growth Equity (PRDSX - Free Report) invests a lion’s share of its assets in securities of growth oriented companies with small size market capitalizations. This fund has one-month and three-month returns of 3.7% and 5.5%, respectively. It has an expense ratio of 0.81% as compared to the category average of 1.32%.
Dreyfus Mid-Cap Growth F invests more than 80% of its assets in securities of companies which falls within the market-cap range of the Russell Midcap Growth Index. This fund has one-month and three-month returns of 4% and 6.9%, respectively. It has an expense ratio of 1.14% as compared to the category average of 1.29%.
TCM Small Cap Growth (TCMSX - Free Report) invests a large share of its assets in companies having market capitalizations similar to those listed in the Russell 2000 Index. This fund has one-month and three-month returns of 2.4% and 5.9%, respectively. It has an expense ratio of 0.95% as compared to the category average of 1.32%.
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