High risk or aggressive investment fund

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A high-risk or aggressive investment fund is a type of investment fund in which the investor is willing to take a high risk, which will also mean a high return.

Therefore, the management entity of the investment fund will have the obligation to invest in financial products classified as high risk. Remember that an investment fund is a collective investment institution that collects money in the form of contributions to invest it jointly.

Characteristics of the aggressive investment fund

The characteristics of these types of fund 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 taking losses. This probability is higher than in other types of funds, such as moderate or conservative.
  • The high probability of having losses implies that the profitability of the investment is high or very high: This is explained because the greater the risk, the greater the profitability offered, since otherwise it would not be worth taking a risk for this type of investors so tall.
  • The products in which you invest tend to be equities, but this is not always the case: Equity products tend to fluctuate more widely. This fluctuation is greater in a situation of financial uncertainty, which would allow to qualify for higher benefits (if the fluctuation is positive). However, you can also invest in fixed income products within an aggressive investment portfolio. For example, a promissory note issued by a company is a fixed income product. However, that company may find itself in a situation of uncertainty, which implies a high risk to invest in it. Therefore, those 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 a proven 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 losing and not recovering the initial investment. However, derived from this high risk, the profitability offered is high or very high, which is its main advantage. In short, there is a great 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 to investors depending on their risk profile. A conservative profile will see more disadvantages, while an aggressive profile will care more about the advantages. The most important thing is to define the risk profile of the investor.

An aggressive investor must be aware of the risk he is taking and not only focus on the high returns he can obtain. First, you need to analyze the risk involved in the investment and, if it matches your risk profile, you will be able to 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.

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