ShmoopTube

00:00

Finance a la shmoop what is an aggressive growth fund a go-go fund

00:06

and/or a high-octane fund ah yes investment funds have oh so many [People put sticker notes on investment fund file]

00:13

labels there are income funds comprised mostly of bonds usually in high yielding

00:19

dividend kind of stocks and you can buy them managed like in the form of a

00:23

mutual fund or unmanaged in the form of an index fund there are growth and

00:28

income funds usually a combo of stocks and bonds so in theory the funds value [Value tree appears]

00:33

grows but it also throws off a lot of cash along the way then there are just

00:36

growth funds notice the word aggressive isn't in there on the volatility

00:41

spectrum well they live out here right-hand side of the bell curve when [Growth funds on right side of a bell curve]

00:45

times are good they're very good when times are bad they're also not good in a

00:49

good year a growth fund can be up 15 20 % maybe more in a bad year well down

00:55

the same so now tack on the word aggressive in front of [Man puts aggressive label on investment fund file]

00:59

that fund flavor and you can maybe double the volatility for the good and

01:04

the bad and the high-octane fund is you know an allegory for gasoline on a fire [Man with gasoline tank by a fire]

01:10

it can really roast you nicely and warmly in the cold night or it can well [Fire creates explosion and man runs away]

01:16

do that so what do aggressive growth funds like these invest in you know go

01:20

go aggressive let's go not just once but twice

01:23

well they invest in typically risky volatile stocks a whole lot of

01:27

technology stocks that are unproven small tech companies are regular

01:31

favorite of this class is this little company the next Amazon in 20 years or [Woman sat at a computer desk]

01:36

is it Pieceocrap.com well over long periods of time and

01:40

inside of bull market era like decades where the market generally goes

01:44

up like it has been since 2009 while aggressive growth funds might compound

01:49

at 11 12 13 14 15% something like that whereas a bit more conservative

01:54

just growth funds might only compound at 8 9 or 10% but those two

01:58

percentage points of compounding actually matter a lot over the long-run

02:02

remember that rule of 72 well take the compound interest and divide it into 72 [Rule of 72 on a 100 dollar bill]

02:06

and that's how long it takes to double well it applies here as well the

02:10

aggressive, in aggressive growth fund should in theory anyway add two percent

02:15

in returns or reward in good times thanks in large part to the added risk

02:19

taken in that category so 36 years pass and that aggressive growth fund all else

02:25

being equal should be double of what a normal growth fund should be but with a [Aggressive and Growth funds marked on a graph]

02:29

whole lot more volatility see that 2% divided into our little rule of 72 thing

02:34

there well that's 36 years to double with that extra 2% so if you can handle

02:39

the volatile, violent, flame field rocky mountain style peaks and volatility [Lava spews out of volcano]

02:45

valleys of depression canyon and kill me now cave well then you'll love the view

02:50

from Everest Lookout and punitive taxes peak if you're an investor like the

02:56

wealthy and aggressive go go high octane funds yeah go go for it [Woman skiing on mountain and falls off the edge]

Full Transcript