After braving rough waters, 2016 finally entered calmer seas. Presuming the same smooth sail, mutual fund big shots expect to see solid stock gains this year. President Donald Trump's market-friendly policies, hike in key interest rate and upward movement in oil prices should prove to be a shot in the arm for the broader markets. Trump's promises during his campaign, which include deregulation, tax cuts and expansionary infrastructure spending, led investors to believe that his presidency will be quite an impetus for the U.S. economy.
The Fed, in the meantime, raised the benchmark rate by 25 basis points to a range of 0.5% to 0.75% in December and suggested more rate increases with the strengthening of the U.S. economy. Oil prices, on the other hand, are positioned to benefit from the recent OPEC deal to cut fuel production.Banking on such favorable factors, investors seeking a high level of capital growth should look no further than aggressive growth mutual funds.
Aggressive Growth Funds for High Capital Gains
Aggressive growth mutual funds invest in companies that show high growth potential. However, such funds come with the risk of share price fluctuation. This category of funds also invests heavily in undervalued stocks, initial public offerings (IPOs) and relatively volatile securities in order to profit in a favorable economic climate. Securities are selected on the basis of a company's potential for growth and profitability.
This category of instruments has a strong positive correlation with market movements and provides stellar returns. Such upbeat performances are achieved by investing in securities issued by companies with strong growth potential and in IPOs which are often resold quickly at a handsome profit. Many aggressive growth mutual funds may also invest in options to achieve their goal of high returns.
Below we present three mutual funds with aggressive growth investment objectives. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) as we expect these to outperform peers going ahead. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also determines the prospects of a fund.
These funds have also given impressive one-year, three-year, and five-year returns, offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money ).
PRIMECAP Odyssey Aggressive GrowthPOAGX seeks to provide long-term capital appreciation. The fund invests primarily in the common stocks of U.S. companies, emphasizing on companies with prospects for rapid earnings growth. POAGX has a Zacks Mutual Fund Rank #1.
PRIMECAP Odyssey Aggressive Growth has given one-year, three-year and five-year annualized returns of 30%, 11.4% and 19.9%, respectively. POAGX, as of the last filing, allocates its funds in three major groups - Small Growth, Foreign Bond and Large Growth. The fund, managed by Primecap Oddys , carries an expense ratio of 0.63%, less than the category average of 1.25%.
Bridgeway Aggressive Investors 1BRAGX seeks to exceed the stock market total return. The fund invests in a diversified portfolio of common stocks of companies of any size that are listed on the New York Stock Exchange, NYSE MKT and NASDAQ. BRAGX has a Zacks Mutual Fund Rank #2.
Bridgeway Aggressive Investors 1 has given one-year, three-year, and five-year annualized returns of 40.3%, 9.9% and 15.7%, respectively. BRAGX, as of the last filing, allocates its funds in three major groups - Large Growth, Small Value and Small Growth. The fund, managed by Bridgeway , carries an expense ratio of 0.63%, below the category average of 1.10%.
Fidelity Capital AppreciationFDCAX seeks capital appreciation. The fund invests primarily in common stocks. It invests in domestic and foreign issuers. FDCAX has a Zacks Mutual Fund Rank #2.
Fidelity Capital Appreciation has given a one-year, three-year, and five-year annualized returns of 19.1%, 7.3% and 13.4%, respectively. FDCAX, as of the last filing, allocates its funds in three major groups - Large Growth, Large Value and Small Growth. The fund, managed by Fidelity , carries an expense ratio of 0.60%, lower than the category average of 1.15%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.