1. Most investors have an allocation to aggressive growth stocks passively (e.g., mutual funds in FAANG, segment of NASDAQ or S&P)
2. For investors who directly manage their portfolio allocation and risk, a direct allocation to aggressive growth provides more control without having to pay higher fees for well-known companies like FAANG.
Most people would probably not consider themselves aggressive growth investors. It may be part of their portfolio, or it may not even be acknowledged, but aggressive growth is an important part to have in your portfolio. However, a lot of people don't exclusively invest in aggressive growth stocks, they get exposure to them through other areas of investing. For example, if they typically were investing in sector funds, or if they're investing part of their portfolio in the NASDAQ, there's going to be some component that is, by definition, representing aggressive growth, but it's not something that the average investor would necessarily single out and exclusively invest in. So they see aggressive growth as part of the wider potential of their portfolio, and it's not really carved out.
Volatility Hard to Stomach but Has Historically Offered Huge Opportunity
What we've done over the years is we've analyzed the highest and the fastest growing stocks and their impact on performance, and we found that this is an area that we have a huge body of knowledge in, and we have focused on that because it gives the greatest opportunity for upside, but it's not necessarily somebody would put all of their investment capital in or would exclusively focus on because of the inherent volatility with investing in this category. Furthermore, a large portion of the investing public is very focused on volatility and wants to manage volatility as much as they manage their return stream. And for most people, it's understandable. It is very painful to see your portfolio values go down, whether it's in your IRA or your 401k, which you see your net worth decrease over a period of time is pretty distressing, and that's just human nature. But for people who have the ability to see past that and understand the historical context around aggressive growth, it does offer a huge opportunity.
Investors Often Have Exposure to Aggressive Growth Stocks but Lack the Ability to Directly Manage Them
Whereas we and other savvy investors might see aggressive growth as a very important opportunity to increase the value of your portfolio on the whole, other people may focus on the volatility and may seek to manage that volatility down by reducing exposure to some of the stocks that maybe the fastest moving.
It may be exciting to have rocket stocks like Amazon or Apple and Tesla when they're going to the moon, but it's also very distressing to a lot of people to see the impact that may have on their overall portfolio if those stocks don’t come in for a while. So, it's something that many investors do actually have in their portfolios, but they don't necessarily segment it into one category that they allocate or a shift away from during different market periods.
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Please note, that the thoughts expressed in this podcast are those of the presenter. This is not, nor should it be considered an offer or a solicitation of an offer for investment.