Aggressive Growth Funds - All You Need to Know

Given their strong emphasis on alpha generation, they are also called capital appreciation or capital gains funds. Due to their composition, market fluctuations have a significant impact on the performance of aggressive growth funds . If the market rallies, such funds do exceptionally well. Conversely, their performance suffers disproportionately during a slump.

Aggressive growth funds are primarily equity centric. They tend to target stocks of varying market capitalisation, belonging to relatively new business entities with growth prospects. Since such companies do not usually pay dividends, fund investors can expect higher returns. When the markets decline, such funds scout for investment opportunities in emerging markets with growth potential.

The names of most growth-oriented funds communicate their investment targets. On the prospectus of such funds, the Fund Objective will read ‘aggressive growth’ or ‘capital opportunity’. Some types of growth funds may also have a regular income or capital protection as their stated investment outcome.

If you are about to retire or have a moderate to low risk tolerance, it is advisable to opt for income-oriented funds or fixed maturity plans that provide assured returns. However, if you have a long-term investment horizon and are comfortable with the high risk, high-reward trade-off, aggressive growth mutual funds may be an excellent option to maximise your returns.It is advisable to build a diversified portfolio by spreading investment risks over multiple asset classes. Well-balanced asset allocation can limit the chances of losses in case of sharp market corrections.

Short Term Capital Gains (STCG) arising from the sale of equity shares attracts taxation at the rate of 15% if units are redeemed within a year. Long Term Capital Gains (LTCG) worth up to Rs. 1 lakh are tax-free. Any returns amounting to over Rs. 1 lakh are taxable at 10% without indexation.

• Aggressive Growth Mutual Funds usually have a higher expense ratio than debt funds, affecting returns.
• Study the performance and features of the fund to ensure that it matches your investment goals.
• Adjust your exposure to aggressive funds to match your financial position and risk tolerance.

Aggressive growth funds are an excellent vehicle to build your wealth by harnessing the market movements. However, it is recommended to be pragmatic about your investment objectives and choose products that are best positioned to achieve them.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.