What are Aggressive Mutual Funds?

What are Aggressive Mutual Funds?

Aggressive Mutual Funds are defined as hybrid funds that invest 65-80% of their total assets in equities and equity-related instruments, with the remaining 20-35% in debt securities and money market instruments. When compared to balanced funds, most aggressive mutual funds provide substantially greater authority to fund managers. As a result, Aggressive Funds can profit from arbitrage opportunities. Even if the fund management is certain to earn strong returns, hybrid funds with a balanced approach are often not permitted to take advantage of any arbitrage possibilities....

Features of Aggressive Mutual Funds

1. Funds Allocation: Due to their equity-heavy allocation, these funds have a high-risk profile. It makes them unsuitable for risk-averse investors....

Who Should Invest in Aggressive Funds?

These funds are best suited for investors seeking maximum financial returns without the risk level of other equity funds. The risk associated with aggressive growth mutual funds is quite significant. While the portfolio includes debt instruments, making these funds less risky when compared to other equity funds, they are nevertheless considered high-risk high-return funds. Aggressive growth funds invest in firms that have strong growth prospects. This is why these funds outperform regular growth funds. Investors with a high-risk, high-gain appetite who desire to grow their portfolios through large capital gains can participate in these sorts of funds....

Factors to Consider Before Investing in Aggressive Mutual Funds

1. Assess the Risks and Returns: Aggressive Funds are considered moderately-high risk investments due to their equity exposure of 65-80%. The risks associated with aggressive funds are fewer than those of a pure equity fund since they have a 20-35% exposure to debt securities and money market instruments. Furthermore, the inclusion of small-cap equities in the equity portfolio or low-quality debt securities might enhance investment risk. Returns are proportional to the portfolio’s stock and security selection....

Taxability of Aggressive Mutual Funds

In terms of taxation, aggressive growth funds are classified as equity funds. Capital gains received within one year are classified as Short Term Capital Gains (STCG) and are taxed at 15%....

Advantages of Aggressive Mutual Funds

1. Diversification : Debt and equities are two categories of assets that are included in the portfolio of aggressive funds. High-risk, high-reward as well as low risk, low reward asset categories are also included. These plans therefore provide diversity. Debt securities can protect investors’ portfolio value during a correction, even when the equity component might yield huge returns....

Disadvantages of Aggressive Mutual Funds

1. Entry or Exit Load: There are mutual funds that impose an entry load, an exit load, or both. The major reasons they collect this fee are to keep their business running and cover employee salaries. Occasionally, the fee might reach a maximum of 3% of the total amount invested. It typically stays at 1%, though....