An investment fund high – risk or aggressive fund is a type of investment in which the investor is willing to take high risk, which will also mean high returns .
Therefore, the investment fund management entity will have the obligation to invest in financial products classified as high risk. Remember that an investment fund is a collective investment institution that captures money in the form of contributions to invest together.
Characteristics of the aggressive investment fund
The characteristics of these types of funds are as follows:
- The investment risk is high or very high. Conservative funds are aimed at investors with a high risk profile. This implies that there is a relatively high probability of having losses. This probability is higher than in other types of funds, such as moderates or conservatives.
- However, this high probability of having losses implies that the return on investment is high or very high. This is explained because the higher the risk, the greater the profitability offered, since otherwise these investors would not be worth taking such a high risk.
- The products in which it is invested are usually of variable income, but it is not always the case. Equity products tend to have a greater fluctuation. This fluctuation is greater in a situation of financial uncertainty, which would allow to qualify for greater benefits (if the fluctuation is positive). However, you can also invest in fixed income products within an aggressive investment portfolio. For example, a promissory noteissued by a company is a fixed income product. However, this company may find itself in a situation of uncertainty, which implies a high risk to invest in it. Therefore, those promissory notes would be suitable for an aggressive profile. On the other hand, there are equity products whose risk is low if they are issued by companies with an accredited solvency and that offer low profitability. These products would not be suitable for an aggressive profile.
Advantages and disadvantages of an aggressive fund
The main drawback of aggressive funds is their high risk and, therefore, their relative high probability of having losses and not recovering the initial investment. However, due to this high risk, the profitability offered is high or very high, which constitutes its main advantage. In short, there is a high probability of having losses with the investment, but if these do not occur, the profitability obtained will be very high.
The advantages and disadvantages of these funds will be more or less important for investors based on their risk profile. A conservative profile will see more inconveniences, while an aggressive profile will care more about the advantages. The most important thing is to define the risk profile of the investor. OR
An aggressive investor must be aware of the risk he is taking and not only look at the high profitability he can obtain. First, you must analyze the risk involved in the investment and, if it fits your risk profile, you can carry out the investment. It is a serious mistake to look only at high profitability without taking into account the risk that this product may have.