While many investor prefer a more conservative or at least middle of the road approach to stock investing, for some a more aggressive approach can make sense. An aggressive investment strategy typically refers to a style of portfolio management that attempts to maximize returns by accepting a relatively higher degree of risk.
Higher returns are almost always synonymous with higher risk, and strategies for achieving higher than average returns typically emphasize capital appreciation as a primary investment objective, rather than income or safety of principal. Such a strategy would therefore have an asset allocation with a substantial weighting in stocks and possibly little or no allocation to bonds or cash.
Aggressive investment strategies are typically thought to be suitable for young adults with modest portfolio sizes, while older investors might generally ditch risk for safety as retirement edges closer. Because a lengthy investment horizon enables youthful investors to ride out market fluctuations, and losses early in their career have less meaning than later, investment advisors typically do not consider this strategy suitable for anyone else but young adults, unless the investor is designating only a small portion of his or her retirement savings. Regardless of the investor’s age, however, a high tolerance for risk is a crucial prerequisite for an aggressive investment strategy.
One benefit of using ETFs is that even in an aggressive portfolio fund managers can balance speculative stocks with more conservative allocations, adding fixed income into the mix as well,to create a blend that would be more difficult to obtain if just trading individual risk-on stocks, and trying to balance them out manually.
The iShares Core Aggressive Allocation ETF (AOA) is one such ETF that focuses on aggressive investors. The fund seeks to track the investment results of an index composed of a portfolio of underlying equity and fixed income funds intended to represent an aggressive target risk allocation strategy. It provides a simple way to build a diversified core portfolio based on more aggressive risk considerations using one low-cost fund. Investors can harness the experience of BlackRock and the efficiency of iShares ETFs to get a broad mix of global bonds and stocks.
AOA is currently up nearly 12% year-to date, and has a modest expense ratio of 0.25%, leaving more money for hawkish portfolio development.
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