Aggressive Risk Investors: Where To Invest For Maximum Returns

Risk tolerance is a crucial aspect of investing, as it significantly shapes an investor's strategy and influences the potential returns and volatility of their portfolio. An investor's risk tolerance is their ability and willingness to endure fluctuations and potential losses in their investments. This is influenced by factors such as time horizon, knowledge of the markets, and financial goals. Aggressive investors, or those with a high-risk tolerance, are comfortable with substantial fluctuations and potential losses in their investment value, seeking higher returns over time. They tend to allocate the majority of their portfolio to riskier assets such as stocks, real estate, high-yield bonds, small-cap and emerging market stocks, and alternative investments.

Stocks

An aggressive investment strategy is one that takes on more risk to achieve higher returns. This strategy is suitable for investors with a high-risk tolerance, a long-term investment horizon, and a solid understanding of the investment landscape.

• Blue-chip stocks: These are stocks of large, well-established companies with a strong track record of performance. Blue-chip stocks are considered less risky than small-capitalisation stocks but can still offer attractive returns.
• Small-cap stocks: Small-cap stocks are shares of companies with a market capitalisation of less than $500 million. Due to their smaller size, these stocks are riskier than large-cap stocks but offer the potential for greater returns.
• Micro-cap stocks: Micro-cap stocks are even riskier than small-cap stocks, as they are shares of companies with a market capitalisation of less than $250 million. The risk is higher with these stocks, but so is the potential for higher returns.
• Foreign stocks: Investing in foreign stocks means buying shares of companies located outside of an investor's domestic market, often in emerging markets. These stocks carry more risk due to factors such as political instability, currency fluctuations, and different regulatory environments. However, they also offer the potential for higher returns.
• Sector-specific stocks: This strategy involves investing in companies within a specific sector of the economy. For example, an aggressive investor might choose to invest in technology or healthcare sectors, which are known for their growth potential.

Aggressive investors should carefully consider their risk tolerance and time horizon before investing in stocks. While stocks offer the potential for substantial gains, they also carry the risk of significant losses. Diversification is a key strategy for aggressive investors to manage risk and protect their portfolios from market volatility.

Mutual funds

An aggressive investment strategy is a style of portfolio management that seeks to maximise returns by taking on a relatively high degree of risk. This strategy is typically suitable for young adults with smaller portfolios, as they have a longer investment horizon and losses early in their career will have less impact. However, regardless of age, a high tolerance for risk is a prerequisite for an aggressive investment strategy.

Aggressive investors may be willing to take on higher risks for the prospect of higher returns. Their focus is often on stocks, including non-US companies, with a smaller allocation of bonds and government securities.

Aggressive mutual funds are hybrid funds that invest between 65-80% of their total assets in equity and equity-related instruments, with the remaining 20-35% in debt securities and money market instruments. These funds are managed by professionals and are suitable for medium-term objectives. They are diverse, less volatile than pure equity funds, and offer taxation benefits.

Aggressive growth funds are a type of mutual fund that seeks capital gains by investing in the shares of growth company stocks. These funds are actively managed and aim to achieve above-average returns when markets are rising. They invest in companies with high growth potential, including newer companies and those in hot sectors of the economy.

Aggressive Mutual Funds:

• Quant Absolute Fund Direct Growth
• HDFC Hybrid Equity Fund Direct Plan Growth
• Groww Aggressive Hybrid Fund Direct Growth
• Edelweiss Aggressive Hybrid Fund Direct Growth
• Canara Robeco Equity Hybrid Fund Direct Growth
• JM Aggressive Hybrid Fund Direct Growth
• Mahindra Manulife Aggressive Hybrid Fund Direct Growth
• Kotak Equity Hybrid Fund Direct Growth
• Mirae Asset Aggressive Hybrid Fund Direct Growth
• UTI Aggressive Hybrid Fund Direct Fund Growth

Aggressive Growth Funds:

• Meeder Dynamic Allocation Fund
• JPMorgan Investor Growth Fund
• TIAA-CREF Lifestyle Aggressive Gr Fund
• Franklin Mutual Shares Fund
• North Square Multi Strategy Fd
• Gabelli Focused Growth and Inc Fd
• E-Valuator Agrsv Growth(85%-99%)RMS Fund
• ClearBridge Aggressive Growth Fund (Ticker: SHRAX)

Exchange-traded funds (ETFs)

Aggressive ETF strategies are designed for investors with a high tolerance for risk and the ability to actively monitor and adjust their positions. These strategies aim to amplify market movements and capture short-term gains through various approaches, including:

Amplifying Market Movements

Aggressive investors can use leveraged ETFs to amplify market movements and target substantial short-term gains. Leveraged ETFs aim to provide 2x or 3x the daily return of their benchmark index. However, this approach can lead to significant tracking errors and increased risk during market declines, making it best suited for short-term trading. Examples of leveraged ETFs include ProShares UltraPro QQQ (TQQQ) and ProShares Ultra S&P500 (SSO).

Timing Economic Cycles

Sector rotation is a strategy that involves shifting investments between different market sectors based on economic cycles and conditions. This approach aims to capitalise on the tendency of specific sectors to outperform during certain economic phases. For example, during an early economic cycle, investors may focus on consumer discretionary, financial, technology, or energy sectors.

Profiting from Market Declines

Traditional ETF shorting involves borrowing and selling ETF shares, aiming to buy them back at a lower price during market declines. Inverse ETFs provide an alternative to shorting by delivering the opposite return of their target index daily. Examples of inverse ETFs include ProShares Short S&P500 (SH) and Direxion Daily Small Cap Bear 3X (TZA).

Swing Trading ETFs

Swing trading with ETFs involves holding positions for several days to weeks to capture intermediate-term market moves. This strategy utilises the liquidity and diversification of ETFs while targeting larger momentum swings. Technical analysis, momentum indicators, volume analysis, and position sizing based on volatility are tools used in this approach.

Aggressive ETF strategies offer the potential for higher returns but also carry higher risks. It is crucial to implement robust risk management strategies and carefully consider the suitability of these strategies for one's investment plan and risk tolerance.

Options and futures

An aggressive investment strategy is a style of portfolio management that aims to maximise returns by taking on a higher level of risk. This strategy is generally considered suitable for young adults with smaller portfolios, as they have a longer investment horizon and losses early in their career have less impact. A prerequisite for this strategy is a high tolerance for risk.

Options

Options are a versatile investment tool that can be used to reduce risk or speculate on the market. They were invented as a risk-reducing tool, shifting risk from those who want to avoid it to those who are willing to accept it for a fee. A put option, for example, guarantees that the value of a stock cannot fall below a certain price level (the strike price) during the option's lifetime. This can provide peace of mind for a risk-averse investor, similar to how homeowners insurance provides peace of mind for homeowners.

However, options can also be used for speculation, especially by aggressive traders who are willing to bet on a decline in stock prices. Put sellers, for instance, are usually speculating that the stock price will not decline or that it will not decline enough to result in a monetary loss.

Futures

Futures are another vehicle that can be used for speculation or hedging against price movements in an underlying asset. They are often traded on margin, allowing for increased leverage and the potential for larger profits but also larger losses. Successful futures traders share the trait of being backed by solid risk management strategies.

Key principles of risk management in futures trading include mastering the instrument, setting stop losses, keeping positions modest, diversifying positions, controlling emotions, and regularly reviewing, refining, and reflecting on one's strategy.

In conclusion, options and futures can be suitable investments for aggressive risk-takers, but it is important to understand the underlying risks and have proper risk management strategies in place.

Real estate

Aggressive investors are typically more tolerant of risks and are willing to take out more loans and spend more money. They are comfortable with volatility and temporary disruptions and are focused on the potential for lucrative final outcomes.

• Faster growth: Aggressive investors are willing to acquire multiple properties quickly, leading to faster portfolio growth and increased revenue.
• More income: With more properties and tenants, aggressive investors can collect higher rental income.
• Competitive dominance: By taking on more risk and investing more capital, aggressive investors can gain a competitive edge in desirable neighbourhoods.
• Prioritize multi-family units: Multi-family properties allow aggressive investors to put down more cash, attract more tenants, and grow their portfolio faster.
• Scout for properties in up-and-coming cities: Aggressive investors look for areas with the potential to explode in popularity and buy multiple properties there.
• Leverage financing: Aggressive investors are comfortable with financial leverage, borrowing more and taking on more debt to maximize their investment potential.
• Act quickly: Aggressive investors need to react swiftly, seizing opportunities without hesitation.
• Minimize repairs and upgrades: Aggressive investors focus on essential repairs to save time and budget, allowing them to act faster.
• Heavy marketing: Investing in marketing and advertising helps fill properties quickly, generating revenue sooner.
• Reinvest proceeds: Aggressive investors reinvest their profits to fuel further growth and acquisitions.

While these strategies can lead to significant gains, they also come with higher risks. Aggressive investors are more vulnerable to real estate market fluctuations, widespread vacancies, and over-leveraging. They have less time to plan and may encounter challenges in managing a rapidly growing portfolio.

To mitigate these risks, aggressive investors should conduct thorough due diligence, prioritize locations with strong demand and growth potential, and screen tenants carefully to minimize vacancies and problem tenants.

Overall, while real estate can be a lucrative investment for aggressive risk-takers, it is important to carefully consider and manage the associated risks.

Frequently asked questions