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Value Line’s Aggressive Growth objective group is, by design, fairly broadbased. It is meant to house any equity fund that invests predominantly in higher-risk common stocks or that has a stated policy of maximum growth without regard to income or time horizons. This clearly covers a lot of ground. 

Note, however, that funds with specific market capitalization specializations and those that invest in narrow industries are often placed into other, more appropriate, objective groups. For example, funds with a focus on small companies are more appropriate in the Small Company objective group for comparison purposes. 

That said, there is often a very fine line between a fund that falls into the Aggressive Growth objective and any number of other objectives, including Growth and Small Company. Much ultimately depends on a judgment call. 

The names of the funds in this group don’t normally have the word aggressive in them, though some do. One overriding feature, however, is the level of risk that managers here are willing to accept. Thus, a fund with the word “value” in its name might very well find its way into this objective group because it invests extensively in turnaround situations—an aggressive tactic that materially increases both risk and potential reward.

Very often, the funds in this objective group have concentrated portfolios. While some argue that these types of funds concentrate investment in a manager’s best ideas, it is undeniable that a smaller number of holdings also reduces diversification—which often increases risk. These types of funds can have the terms “select,” “focused,” or “concentrated” in their names to denote the relatively small number of holdings, though that is not always the case.

Included in this category are funds that are designed to outperform an index, such as the S&P 500, NASDAQ, or Dow Jones Industrial Average, by a margin of two or, in some cases, three to one. These funds are designed to outperform an index by going up twice as fast, for example, as the S&P 500. Such funds use leveraged instruments, including equity index swaps, futures contracts, and options to achieve their required results. This type of fund allows individual investors to hedge at least a percentage of their investment portfolio as an alternative to selling a fund when prices appear to be high. As an example, such funds can also be used to hedge an individual retirement account portfolio. Losses in an IRA cannot be deducted from ordinary income, so such hedges help protect gains.

Over the long term, the Aggressive Growth objective group has been a decent performer relative to the broader market, as measured by the S&P 500.  For the 10-year period ended February 28, 2013, the group had an annualized gain of 7.4%, while the S&P 500 reported an annualized gain of 8.2%.  For five years and three years, the group had annualized returns of 2.8% and 9.0%, respectively, while the S&P 500 reported annualized gains of 4.9% and 13.5%, respectively. During the past year, the Aggressive Growth objective group underperformed, and reported a return of 6.9%, below the S&P 500, which had a return of 13.5%. Also, year to date through February 28, 2013, the group reported a gain of 5.1% compared with a gain of 6.6% for the Index. The group has an average Risk Rank of 3, indicating that funds in this group might appeal to a broad range of investors. That said, as the stock market continues to seesaw, funds with concentrated portfolios may be quite volatile.


Fund Name: Rydex Dow 2X Strategy A
Ticker: RYLDX
Year-to-Date Return: 18.43%
Objective: Perform at twice the daily return of the Dow Jones Industrial Average.
Investment Strategy:
• Own the Dow stocks and related derivatives to achieve twice the return of the Dow on a daily basis
• Invests at least 80% of assets in stocks/derivatives that will perform in line with the Dow Jones Industrial Average


Fund Name
: Rydex Russell 2000 2X Strategy A
Ticker: RYRUX
Year-to-Date Return: 18.07%
Objective: Perform at twice the daily return of the Russell 2000 Index.
Investment Strategy:
• Invests at least 80% of its assets in stocks/derivatives that will perform in line with the Russell 2000 Index

Fund Name: Baron Partners Fund
Ticker: BPTRX
Year-to-Date Return: 13.25%
Objective: Seeks capital appreciation.
Investment Strategy:
• Invests at least 80% of its assets for the long-term primarily in the common stocks of U.S. growth companies of any size.
• Purchases securities that management believes could double in value within four years.
• The fund believes the companies have favorable price-to-value characteristics, are well managed, have significant long-term growth prospects, and have significant barriers to competition.
• May borrow from banks in an amount up to one-third of total assets for additional leverage.

  

Top 10 Aggressive Growth Funds Performance through February 28, 2013:

 

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3 Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

Rydex Dow 2X Strategy A

RYLDX

18.43

3.13

16.92

16.06

1.97

Rydex Russell 2000 2X Strategy A

RYRUX

18.07

1.79

22.49

24.97

1.01

Rydex S&P 500 2X Strategy A

RYTTX

15.92

2.31

14.45

16.23

-0.16

Baron Partners

BPTRX

13.25

4.41

14.77

20.85

5.85

ProFunds Industrial UltraSector

IDPIX

12.77

3.69

17.06

22.94

2.49

Profunds Ultrabull

ULPIX

12.70

2.29

14.49

16.17

-0.37

Rydex MidCap 1.5X Strategy A

RYAHX

12.18

1.25

15.57

20.61

6.89

Rydex Russell 2000 1.5X Strategy A

RYAKX

11.06

1.46

16.58

18.53

5.15

ProFunds  Consumer Serv Ultra  

CYPIX

10.59

1.15

10.59

16.74

12.44

Rydex Nova A

RYANX

9.73

1.88

11.00

12.64

2.89

Aggressive Growth Objective Group

  

5.05

0.65

6.05

6.96

2.76

  

 

  

  

At the time of this article's writing, the authors did not have positions in any of the companies mentioned.