AGGRESSIVE GROWTH INVESTORS

I know we have some aggressive growth investors in our group.  Aggressive growth investors are willing to take on a bit more risk to achieve investment returns that are above average.

When I think about aggressive growth funds, I use the S&P 500 index funds as a reference point.  The S&P 500 index delivers solid growth for all investors – roughly 10% per year.  But aggressive growth investors are looking to generate even higher returns.  They want to beat the returns of the S&P 500.

Once again, I will only be focusing on funds here.  As you know, I do not recommend buying individual stocks.  You have to get lucky picking stocks to beat the best funds in the long term.  Only a handful of people on the planet can do that consistently.  You are not one of them.

There are several funds that can generate higher returns than the S&P 500.  And almost all of them have a technology focus. 

Since I will only be covering growth funds that have a long track record of success, these funds don’t carry much more long-term risk than the S&P 500.  But they all carry a higher risk of short-term volatility.  While you can be pretty confident in their long-term returns, their short-term results will be more volatile than the S&P 500.  For example, the Nasdaq index funds that have a higher concentration of tech companies declined by 30% in 2022 compared to the 19% drop in the S&P 500. 

Aggressive growth investors simply need to be prepared for more short-term volatility.

A good place to start for aggressive growth investors is the Nasdaq.  Both the Nasdaq and the Nasdaq-100 have 50% of their assets invested in technology companies compared to 30% for the S&P 500.  Both the Nasdaq and the Nasdaq-100 are index funds.  This means that there is no stock picking in these funds.  They are managed by a computer which automatically mirrors the index they are following.

All of the other funds listed below are mutual funds.  This means that a fund manager manually picks the stocks that are in the fund.  Based on their ongoing analysis, they are constantly buying and selling individual stock holdings. 

All else being equal, I much prefer index funds to mutual funds.  Stock pickers don’t typically perform as well as the best index funds.  The mutual funds below have strong performance mainly due to their industry concentration and not their stock picking in my opinion.  Technology companies have performed extremely well over the last 30 years so most funds that have invested heavily in tech have also performed well.

The table below compares the 30-year and 20-year investment returns of some of the best growth funds.  It also includes the percentage that each fund has invested in the technology sector.  While the S&P 500 holds 30% of its assets in technology companies, the Vanguard IT fund holds 99% of its assets in tech.

When I want more growth, I stick with the Nasdaq-100.  Very few funds can beat its performance and the ones that do carry more risk.

Using a loss protection system like our Beyond Buy & Hold Market Signals product is really important when you are invested in aggressive growth funds.  Aggressive growth funds have dropped by over 70% on occasion.  With Market Signals you can capture the upside of aggressive growth funds and also protect yourself from big losses in bear markets. Combining an aggressive growth fund strategy with our Market Signals system provides investors with the potential to earn well over 15% per year.

I did include a non-tech mutual fund on the list – Baron Retail Partners.   They are the Unicorn in the mutual fund industry – the one team that can consistently pick winning stocks.  Their performance for every time period below beats the Nasdaq-100 and they do this without a narrow focus on sectors like technology. 

I have two concerns with this fund. 

The first concern with this fund is that they tend to place big bets on a limited number of stocks.  The often hold 50% of their assets in just one stock.  This is how they achieve their exceptional results, but it does make this fund riskier. 

Another way that Baron’s generates above average returns is through the use of leverage.  Leverage means debt.  Baron’s borrows money to invest in stocks.  Investors that borrow money amplify their returns when stocks are rising.  But leverage introduces more risk because leverage amplifies losses on the way down. 

Personally, Baron’s is too risky for me.  But I can’t argue with their track record of consistent performance.

Stay Disciplined My Friends,

Phil

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Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.

Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.