CNN’s Fear and Greed Index is pegged into the greedy side of things. This could be a sign investors are ready to dial up the risk and head back into growth. One fund to consider is the American Century Focused Dynamic Growth ETF (FDG).
The capital markets expect interest rate hikes from the Fed to fall as inflation dissipates. This could be a boon for growth stocks. In a market rally, they could make profound moves to the upside in the short term. Additionally, they could still offer investors growth prospects for the long term.
One of the prime drivers of growth, sector-wise, is artificial intelligence (AI). Looking under the hood of FDG, its top holding as of May 31 is Google’s parent company Alphabet. The search engine giant has been increasingly leaning on AI as a revenue generator that could provide a sustainable growth opportunity.
“Growth stocks are enjoying huge gains in 2023 so far due to the hype surrounding artificial intelligence and expectations of a slowdown in interest rate hikes,” Tip Ranks noted. “Further, recent economic data reflects slowing inflation and a decrease in the yield on long-term government bonds. Interestingly, this makes for a favorable scenario for growth stocks.”
Focused, Concentrated Holdings
Actively managed FDG invests in companies in their early and rapid growth stages. The fund’s managers look for companies with a competitive advantage, profitability, growth, and scalability that other managers may overlook.
“Our bottom-up investment process seeks to uncover companies with durable competitive advantages we believe offer opportunities for higher and sustained growth,” the fund’s product website said.
Given its discernible filter, investors won’t see hundreds of holdings in FDG’s portfolio. Instead, the fund has 37 holdings as of April 30, with its top 10 holdings comprising over 50% of the fund.
According to the product site, this focused approach means FDG has a “risk-aware portfolio of 30-45 holding companies with improving fundamentals we believe offer the best opportunities for long-term capital appreciation over multiple market cycles.”
Additionally, that active management component means that the fund stays pliable given current market conditions. This gives the portfolio managers the ability to add or reduce holdings as necessary in order to capture more upside or protect the downside. This is an inherent advantage of having active management.
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