Which means for our asset as example: The total return over 5 years of Aggressive Risk Portfolio is 104.2%, which is greater, thus better compared to the benchmark SPY (91.7%) in the same period. Is There a Relationship Between Bonds & the Stock Market? What Is Mutual Fund Core and Satellite Investing? Asset allocation basically means portfolio diversification. He is a Certified Financial Planner, investment advisor, and writer. Investing involves risk, including the possible loss of principal. Investors may choose to buy aggressive funds, or they may also build their own aggressive portfolio to suit their risk tolerance and investment objectives. This is designed for individuals who want larger returns and are willing to accept more risk. But what makes one investment more \"aggressive\" than another? The wide world of mutual fund products has something to offer investors of all types. 30% Large-cap stock (Index) 15% Mid-cap stock 15% Small-cap stock 25% Foreign or Emerging Stock 15% Intermediate-term Bond I spent quite a while getting it right, but once it’s set, you don’t have to change it often. In the example above, Mr. Smith has allocated his portfolio among a broad cross-section of assets, including small-cap and large-cap stocks, investment-grade and high-yield bonds, and cash. Published June 27, 2014 Updated June 27, 2014 . Historical data shows that stocks are more volatile and riskier than bonds over the long term. Nvidia is the perfect example of a high-risk stock that has been a winning investment. If you plan to retire in the next 10 years but still want an aggressive portfolio, consider the following example: The one major mistake when building a portfolio of mutual funds is buying funds that are not right for your goals and risk tolerance. This portfolio seeks to achieve a high total return on investment through long-term capital appreciation. The highest gain this portfolio might have in a calendar year might be 15%, and the worst decline might range from 5 to 10%. Model #5: The Aggressive Portfolio. Finally, most portfolios, but again not, all include some international stock market exposure. Overall, just one of my portfolios failed to beat the stock market return over the period. Get Started With These Top Vanguard Funds, These Are the Best Types of Funds for 401(k) Plans. … Past performance is not indicative of future results. An aggressive mutual fund portfolio is appropriate for an investor with a higher-risker tolerance level and a time horizon—the time before you need invested sums returned—longer than 10 years. Aggressive Portfolio This aggressive portfolio has 80% invested in a variety of equity funds, 10% in bonds, 5% in real estate, and 5% in gold. Aggressive portfolios are most appropriate for investors in their 20s, 30s, or 40s because they typically have decades to invest and recoup any losses they may experience. In its worst year, it could decline by 20-30%. Finally, we have the aggressive portfolio. Obtaining higher returns with mutual funds is the goal of all investors, but getting higher returns will almost always require accepting greater market risks. The Balance does not provide tax, investment, or financial services and advice. Most investors tend to fall into the moderate category, which means they want to achieve good returns but are not comfortable taking high levels of market risk. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. i Thinkstock/Comstock/Getty Images. For aggressive investors only: The maximum growth portfolio . The following example investment portfolios are all based on real, live clients who with bond portfolios. In its best year, it might gain 30-40%. What Does an Aggressive Portfolio of Mutual Funds Look Like? Here is a conservative mutual fund portfolio example by fund type with 25% stocks, 45% bonds, and 30% cash and money market funds. American Association of Individual Investors. Investment Portfolio Categories. How you invest starts with choosing an asset mix that is in line with your current circumstances and your short- and long-term goals. Investors come in three types: aggressive, moderate, and conservative. Here are examples of an 85% stocks and 15% bonds portfolio allocation by mutual fund type for an aggressive investor. An aggressive portfolio might average 7-10% average rate of return over time. I see this group as individuals who are 18-30, and have over 30+ years until they will need to access the money in the portfolio. Another simple and aggressive portfolio that’s 75% in equities. Get Started With These Top Vanguard Funds, How to Build an Entire Portfolio With Only the Best of Vanguard Funds, See How Many Mutual Funds You Need to Be Diversified, See the 5 Best T. Rowe Price Mutual Funds to Buy, These Are the Best Types of Funds for 401(k) Plans, Top Balanced Funds to Buy for Long-Term Investment. Aggressive mutual funds typically invest in areas that have potential for higher returns than market averages or a relative benchmark. If you're trying to boost your annual income you can park some of your in cash certificates of deposit or federal bonds. What Are Conservative Mutual Funds and Who Should Invest? What Is Mutual Fund Core and Satellite Investing? The ideal goal with proper asset allocation is to maximize the risk-adjusted returns of a portfolio, and tailor its growth potential and risks for an individual investor’s needs and goals. However, they do offer insight into the basic guidelines for building a portfolio. Expected returns and market volatility can vary, depending upon the specific investments chosen in each individual portfolio. What Is an Aggressive Growth Mutual Fund? Keep in mind that all investors are different. Another quick return investment favored by Zacks is Arcosa . N.B. Perhaps you will see some similarities between their situations and yours. If there is a severe downturn in the market, you'll need plenty of time to make up for the decline in value. "AAII Asset Allocation Models." By using The Balance, you accept our. These portfolio samples are general and may not be appropriate for every investor. This is because passive investors understand that there is no ‘correct’ answer to asset allocation. Should You Invest in a Total Stock Index Fund or an S&P 500 Index Fund? Mutual Fund Portfolio Examples for 3 Types of Investors, Conservative Investor Mutual Fund Portfolio Example. Kent Thune is the mutual funds and investing expert at The Balance. A moderate portfolio of mutual funds is appropriate for an investor with medium risk tolerance and a time horizon longer than five years. Are you conservative or aggressive? Why Asset Allocation Matters What’s most interesting to me about the change in the numbers from the S&P 500-only investment to the results we see from Portfolio 1 is that our … Even within the equity element of a portfolio, the composition of stocks can have a substantial impact on the amount of risk exposure. No, we’re not talking about your driving. While this portfolio may seem as though it's not that diverse, it actually doesn't need to be, because the few investments that it contains are very low risk and can help you protect and extend your retirement savings.Furthermore, the simplicity of it makes it less confusing and more welcoming to inexperienced, cautious investors. 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