What is an Aggressive Investment Strategy?
An aggressive investment strategy typically refers to a style of portfolio management that attempts to maximize returns by taking a relatively higher degree of risk. Strategies for achieving higher than average returns typically emphasize capital appreciation as a primary investment objective, rather than income or safety of principal. Such a strategy would therefore have an asset allocation with a substantial weighting in stocks and possibly little or no allocation to bonds or cash.
Aggressive investment strategies are typically thought to be suitable for young adults with smaller portfolio sizes. Because a lengthy investment horizon enables them to ride out market fluctuations, and losses early in one's career have less impact than later, investment advisors do not consider this strategy suitable for anyone else but young adults unless such a strategy is applied to only a small portion of one's nest-egg savings. Regardless of the investor’s age, however, a high tolerance for risk is an absolute prerequisite for an aggressive investment strategy.
Key Takeaway
- Aggressive investing accepts more risk in pursuit of greater return.
- Aggressive portfolio management may achieve its aims through one or more of many strategies including asset selection and asset allocation.
- Investor trends after 2012 showed a preference away from aggressive strategies and active management and towards passive index investing.
Understanding Aggressive Investment Strategy
The aggressiveness of an investment strategy depends on the relative weight of high-reward, high-risk asset classes, such as equities and commodities, within the portfolio.
For example, Portfolio A which has an asset allocation of 75% equities, 15% fixed income, and 10% commodities would be considered quite aggressive, since 85% of the portfolio is weighted to equities and commodities. However, it would still be less aggressive than Portfolio B, which has an asset allocation of 85% equities and 15% commodities.
Even within the equity component of an aggressive portfolio, the composition of stocks can have a significant bearing on its risk profile. For instance, if the equity component only consists of blue-chip stocks, it would be considered less risky than if the portfolio only held small-capitalization stocks. If this is the case in the earlier example, Portfolio B could arguably be considered less aggressive than Portfolio A, even though it has 100% of its weight in aggressive assets.
Yet another aspect of an aggressive investment strategy has to do with allocation. A strategy that simply divided all available money equally into 20 different stocks could be a very aggressive strategy, but dividing all money equally into just 5 different stocks would be more aggressive still.
Aggressive Investment strategies may also include a high turnover strategy, seeking to chase stocks that show high relative performance in a short time period. The high turnover may create higher returns, but could also drive higher transaction costs, thus increasing the risk of poor performance.
Aggressive Investment Strategy and Active Management
An aggressive strategy needs more active management than a conservative “buy-and-hold” strategy, since it is likely to be much more volatile and could require frequent adjustments, depending on market conditions. Morerebalancing would also be required to bring portfolio allocations back to their target levels.Volatility of the assets could lead allocations to deviate significantly from their original weights. This extra work also drives higher fees as the portfolio manager may require more staff to manage all such positions.
Recent years have seen significant pushback against active investing strategies. Many investors have pulled their assets out of hedge funds, for example, due to those managers'underperformance. Instead, some havechosen to place their money withpassive managers. These managers adhere to investing styles that often employ managing index funds for strategic rotation. In these cases, portfolios often mirror a market index, such as the S&P 500.
FAQs
Aggressive Investment strategies may also include a high turnover strategy, seeking to chase stocks that show high relative performance in a short time period. The high turnover may create higher returns, but could also drive higher transaction costs, thus increasing the risk of poor performance.
What is an aggressive investment strategy? ›
An aggressive investment strategy is a high-risk, high-reward approach to investing. Such a kind of strategy is appropriate for younger investors or those with higher risk tolerance. The focus of aggressive investing is capital appreciation instead of capital preservation or generating regular cash flows.
What is an aggressive risk profile investment style? ›
Aggressive Risk Profile: An aggressive risk profile suggests a higher tolerance for risk and a willingness to pursue higher returns, even if it means enduring significant market fluctuations. This profile may involve a focus on growth stocks, venture investments, or other high-risk, high-reward opportunities.
Is it safe to invest aggressively? ›
Financial professionals usually don't recommend aggressive investing for anything but a small portion of a nest egg. And regardless of an investor's age, their risk tolerance will determine if they become an aggressive investor.
What is an aggressive growth strategy? ›
The Aggressive Growth Strategy follows a focused, high-conviction approach, emphasizing stocks across market capitalizations with sustainable earnings and cash flow growth.
What are the benefits of aggressive investing? ›
Aggressive investing accepts more risk in pursuit of greater return. Aggressive portfolio management may achieve its aims through one or more of many strategies including asset selection and asset allocation.
What is the aggressive approach strategy? ›
This type of strategy involves taking bold and decisive actions , often with a high level of risk , in order to gain a competitive advantage and increase market share . It can include tactics such as aggressive marketing campaigns , price cutting , and rapid expansion into new markets .
What is aggressive risk? ›
Aggressive risk investors are well versed with the market and take huge risks. Such types of investors are used to seeing large upward and downward movements in their portfolio. Aggressive investors are known to be wealthy, experienced, and usually have a broad portfolio.
What is the most aggressive trading strategy? ›
Scalping is the most aggressive form of active trading and involves making trades in a matter of seconds or minutes to profit from small price movements.
What is the rate of return for an aggressive investor? ›
While quite a few personal finance pundits have suggested that a stock investor can expect a 12% annual return, when you incorporate the impact of volatility and inflation, 7% is a more accurate historical estimate for an aggressive investor (someone primarily invested in stocks), and 5% would be more appropriate for ...
Equities are generally considered the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the successes and failures of private businesses in a fiercely competitive marketplace. Equity investing involves buying stock in a private company or group of companies.
Should I invest more conservatively or aggressively? ›
Conservative investing strategies generally have lower returns than more aggressive strategies, such as a growth portfolio. For example, a capital growth strategy seeks to maximize capital appreciation or the increase in a portfolio's value over the long term.
What is the most aggressive stock? ›
Aggressive stocks
| S.No. | Name | Qtr Sales Var % |
|---|
| 1. | P & G Hygiene | 13.48 |
| 2. | Tata Elxsi | 8.12 |
| 3. | CRISIL | 3.19 |
| 4. | Tanla Platforms | 20.64 |
10 more rowsAggressive investment refers to a portfolio management strategy that involves aiming to maximize financial gains by taking high risks. Such a strategy is generally suitable for young investors with a long-term investment horizon.
What is the objective of aggressive growth investment? ›
An aggressive growth fund invests in companies that have high growth potential, including newer companies and those in hot sectors of the economy. As a result, these funds are actively managed to achieve above-average returns when markets are rising.
Which fund is most aggressive? ›
Here are the best Aggressive Allocation funds
- Meeder Dynamic Allocation Fund.
- JPMorgan Investor Growth Fund.
- TIAA-CREF Lifestyle Aggressive Gr Fund.
- Franklin Mutual Shares Fund.
- North Square Multi Strategy Fd.
- Gabelli Focused Growth and Inc Fd.
- E-Valuator Agrsv Growth(85%-99%)RMS Fund.
There are many different types of aggressive investments, but some of the most common include stocks, real estate, and commodities. Stocks are shares in a company that can be bought and sold on the stock market. One of the biggest benefits of aggressive investing is that it can help protect your money from inflation.
What is the most risky investment strategy? ›
While the product names and descriptions can often change, examples of high-risk investments include: Cryptoassets (also known as cryptos) Mini-bonds (sometimes called high interest return bonds) Land banking.
What is the difference between aggressive and conservative investing? ›
An investor can either adopt the conservative approach or aggressive approach to invest his money. The former involves investment in fixed income instruments and debt mutual funds while the latter includes investing in equity and equity oriented mutual funds.
