What is an Aggressive Portfolio?
While searching a question and answer site, I have found this question “What is an aggressive portfolio?” There are several answers found, but in the scenario of my recent article named “Investment portfolio models” thought to add an article on this subject.
In my article, I have introduced 5 portfolio models to the investors and within that, one portfolio is aggressive portfolio.
So how does an aggressive portfolio look like?
Aggressive portfolio creating by adding instruments which is riskier by nature but able to yield higher profits. In simple words, an aggressive portfolio is suitable to investors who are ready to take more risks through investing in riskier products for higher returns.
Aggressive investment portfolio example
Here is an example portfolio for aggressive investors. Popular products that create an aggressive portfolio are:
Stocks and Shares
A mix of stocks and shares from booming sectors, including large cap, mid cap and small cap stocks.
Mutual funds
A portfolio with mix of mutual funds from small cap segments, thematic, sectoral, hybrid funds and international funds
Futures and options
Some investors found investing in futures and options to create wealth for short time too as a part of their portfolio.
Units of real estate investment trust or REITs
Understand the aggressive nature through beta value
Aggressive products especially stocks and mutual fund comes with high beta value. Beta value of any stock is more than 1, can consider the stock is aggressive in nature.
Beta value of the stock or mutual fund informing its volatility against the market index or benchmark.
For example a stock with high beta value would shrink in price more than its benchmark when market is coming down. In the same way, the price will be increased more than its benchmark when markets are going up. It shows the stock is highly volatile and risky, but capable to yield more returns.
Advantages of aggressive investing
If an investor is ready to take high risk, aggressive investing is the best for higher returns. His portfolio includes products with high risks but capable to yield high returns.
For example, sector funds invest predominantly on the stocks of companies in the same sector that hold higher risk. When there is any negative affect to that sector, invested capital will shrink to a great extend. In the same way, if the sector is performing well, investors wealth will shoot up!
Disadvantages of aggressive investing
- Nature of the investments in the aggressive portfolio is highly risky and capable to reduce the wealth to a great extend.
- This portfolio is not at all suitable for people with short term investment goals.
- Monitoring and churning activity is high with such portfolios and in regular intervals. This is required time to time attention and extra time from the investors.
Who can create aggressive portfolio?
As said, aggressive portfolio is best for those are ready to take high risk and invest for long time. It is suitable for young investors who are generally willing to take risk. However, the investment instruments must be analysed and validated properly before adding to the investment portfolio.
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