With all the three major benchmark indexes posting record-high growth in the first half of the year, aggressive growth funds have come into the spotlight. Investors and market watchers are now assessing first-half gains and wondering whether the market’s successful run will continue in the second half. A slew of encouraging economic data including a bullish jobs report along with strong earnings results facilitated first-half growth, especially in the later part of the period.
Banking on such positive vibes, the addition of mutual funds with stunning growth potential to your portfolios could prove to be a lucrative investment choice. Aggressive growth funds are considered one of the best investment options for investors with a high risk appetite in search of optimum capital appreciation. Now, let us take a look at some of the encouraging factors that contributed to gains in these mutual funds.
Strong Performance in First-Half 2017
In the first half of the year, the Dow, the S&P 500 and the Nasdaq increased 8%, 8.2% and 14.1%, respectively. The Dow and the S&P 500 posted their best first-half performance since 2013, while the Nasdaq recorded its best performance for the period since 2009.
During the first part of the previous half, positive sentiments over Trump’s economic policies including “massive” tax cuts, deregulation initiatives and surge in infrastructure spending propelled the indexes higher. But markets managed to keep their sheen even when Trump’s policies failed to gain passage in the Congress, on the back of a strong job market, more confident consumers and solid corporate earnings. (Read More)
Also, job additions averaged at 172,000 in the first six months of this year. Also, the unemployment rate declined from 4.4% to 4.3% in May, marking the lowest level since 2001.
Looking ahead, according to the recent Conference Board data, the Consumer Confidence Index rose to 118.9 in the last month of first half from the prior month’s reading of 117.6. The Conference Board’s Director of Economic Indicators also said that consumers’ outlook for the economy touched a near 16-year high in June. (Read More)
Further, Q2 results from 420 S&P 500 members that combined account for 86.7% of the index’s total market capitalization have been upbeat. Total earnings for these companies are up 11.6% from the same period last year on 5.6% higher revenues, with 74.3% beating EPS estimates and 68.3% beating revenue estimates. (Read More)
Aggressive Growth Funds
Given such favorable conditions, 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 year-to-date period has been quite strong. Growth funds in the three fund categories in terms of market cap, namely large cap, mid cap and small cap, gave respective returns of 17.5%, 13.1% and 9.6%.
Buy These 5 Best Performing Aggressive Growth Funds
Aggressive growth funds generally invest in small- and mid-cap companies with ample scope to grow over time. In this scenario, we have selected five aggressive growth funds which have a Zacks Mutual Fund Rank #1 (Strong Buy) and impressive first-half 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.
RIMECAP Odyssey Aggressive Growth (POAGX - Free Report) seeks to provide long-term capital appreciation. POAGX invests primarily in the common stocks of U.S. companies, especially those with prospects for rapid earnings growth. The fund may also invest in common stocks of companies from different market sectors.
POAGX’s first-half returns for this year was 15.7%. Its annual expense ratio of 0.63% is lower than the category average of 1.24%.
T. Rowe Price QM US Small-Cap Growth Equity (PRDSX - Free Report) seeks capital appreciation over the long run. PRDSX invests the lion’s share of its assets in securities of growth-oriented companies with small size market capitalization.
PRDSX’s first-half returns for this year was 10.7%. Its annual expense ratio of 0.81% is lower than the category average of 1.43%.
Loomis Sayles Growth A (LGRRX - Free Report) 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’s first-half returns for this year was 17.4%. Its annual expense ratio of 0.92% is lower than the category average of 1.12%.
Eagle Mid Cap Growth R6 (HRAUX - Free Report) invests a bulk of its assets in equity securities of mid-cap companies. HRAUX will invest mainly in the equity securities of companies with above-average growth potential.
HRAUX’s first-half returns for this year was 16.1%. Its annual expense ratio of 0.72% is lower than the category average of 1.24%.
JPMorgan Small Cap Growth A (PGSGX - Free Report) invests a huge portion of its assets in securities of small capitalization companies. PGSGX seeks long-term capital growth primarily from a portfolio of equity securities of small-capitalization and emerging growth companies.
PGSGX’s first-half returns for this year was 19.8%. Its annual expense ratio of 1.25% is lower than the category average of 1.43%.
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