The Pros and Cons of an Aggressive Growth Mutual Fund

A lot of people are wary about an aggressive growth mutual fund, thinking that this type of investment is too risky. However, like all types of investment vehicles, this type of mutual fund can go both ways, meaning it has both upsides and downsides. If you are one of those investors who are still in the process of making up your mind whether to invest or not to invest in aggressive growth mutual funds, check out the pros and cons of this type of investment vehicle before you make a decision.

Advantages

If you are looking for medium- to long-term investment vehicles, you should consider investing your money into fast growth mutual funds. Although this type of mutual fund exposes your investment to a considerable amount of risk, if you put your money into a diversified portfolio, the risk is spread out among a number of investments. As it is, your investment is protected to a certain degree and since you are investing on a long-term basis, you have a better chance of earning more in the long run. Note that mutual funds grow with time so the longer you invest your money in this investment vehicle, the better are your chances of getting good results.

Another advantage is that you may be able to earn money quick if you invest your money in fast-moving financial investments such as Initial Public Offerings (IPOs) and small value stocks. Investing in IPOs is a good way to start your aggressive fund portfolio. Most companies that issue IPOs are looking at the possibility of earning money in the shortest time possible so if you want to earn money fast, look for IPOs issued by reputable companies. Aside from IPOs, you may want to look into low priced issues or small value stocks. Yes, stocks valued at $5 to $20 carry greater amount of risk than higher priced stocks but these types of stock move fast. Note that some small value stocks double their prices in just a matter of months so if you invest in $5 stocks and your stocks perform well, the value of your stocks can easily reach more than $10 in just a short period of time.

When it comes to investments, volatility goes both ways and if you hire a good fund manager, you may rake in a handsome profit in this type of investment. By filling up your mutual fund portfolio with fast-moving investments, you can expect to see some profits very soon.

Disadvantages

High risk is always the biggest disadvantage of aggressive growth mutual funds. Most people who go into this type of mutual fund are looking for some quick money so the competition can be quite brutal in bear markets, and the income you earned in the previous years on your mutual funds can be erased within a matter of minutes. Note that at the height of the 2008 credit crisis, high risk mutual fund portfolios were one of the most badly affected and many people lost their retirement income. If you do not have the stomach for this type of risk, you may prefer to put your money in safer investments such as short- to medium-term bonds.

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