12 Best Aggressive Funds For A Bull Market In 2019
The stock market suffered two massive bouts of selling and volatility in 2018. The Nasdaq fell into correction mode, and most of the
And yet, the bull market may very well persist in 2019, keeping aggressive funds in play as we head into the new year.
For all the market's problems, many fundamentals are fine. A still-expensive stock market did lose a little froth during the fourth quarter of 2018. Trade talks between the
There are plenty of risks, of course, including a collapse in trade relations with
"Even an aggressive investor needs to make sure they stay diversified," says
Here are 12 of the best aggressive funds to consider as we head into 2019. All of them have spread their assets across dozens, or even hundreds, of stocks. Moreover, they specialize in various sectors, so you can buy a few and keep a balanced (but still attack-ready) portfolio.
Primecap Odyssey Growth
Market value:
Dividend yield: 0.3%
Expenses: 0.67%
Primecap Odyssey Growth (POGRX,
POGRX has given investors an annualized 16.9% return over the past decade, versus 14.1% for the S&P 500, and it has also beaten the average large-cap growth fund (14.7%) over that time.
What is the secret to POGRX's success? Selectivity. Primecap's managers have invested in a carefully chosen group of growth companies, going beyond tech (29.9% of the fund's assets) to make prudent bets on healthcare (31.3%), industrials (14.3%) and consumer discretionary stocks (11.1%) with strong revenue growth potential.
Primecap Odyssey - a member of our
T. Rowe Price QM U.S. Small-Cap Growth Equity
Market value:
Dividend yield: 0%
Expenses: 0.79%
Small-cap stocks are where you want to be if you're betting on a market recovery, as they tend to outperform their large- and mid-cap brethren over the long-term. They also tend to be the place to be during market recoveries - two years after the early 2009 market low, the Russell 2000 Index of small-cap stocks had risen 87% versus the S&P 500's roughly 58%. So in the future, if the market does suffer a significant downturn, know that small caps are a great place to camp out for a recovery.
PRDSX, which holds just fewer than 300 small caps including
Cohen & Steers Total Return Realty Fund
Market value:
Distribution rate: 8.0%*
Expenses: 0.87%
The
So why jump into real estate as we enter 2019?
A stronger economy (like the one we're in right now) typically means more tolerance for higher rents, as well as higher occupancy rates in offices and retail spaces. Yet at the same time, REITs have been discounted for bigger vacancies for years, making them a great contrarian economic growth play.
And why
The fund is a high-yielding play that has typically thrown off strong total returns over the long run. The fund's 10-year average return sits at 15.9%, which edges out its benchmark of 15.8%. The fund is made up of a wide array of REITs, including 13% in apartments, 10% in data centers and 10% in healthcare. But 15% of the fund's assets are invested in preferred stocks, lending stability and additional yield to this already income-friendly strategy.
Top holdings include the likes of logistics REIT Prologis (PLD), luxury apartments play
*Distribution rate can be a combination of dividends, interest income, realized capital gains and return of capital, and is an annualized reflection of the most recent payout. Distribution rate is a standard measure for CEFs.
BlackRock Science & Technology Trust
Market value:
Distribution rate: 6.3%
Expenses: 0.89%
The
Technology has taken it on the chin in the waning months of 2018, weighing on returns as a whole. The Technology Select Sector SPDR ETF (XLK) has delivered less than 6% in total returns for the year-to-date, but BST and its hefty distribution have given its unitholders 16% more than they were sitting with at the start of 2018.
Technology is an increasingly important aspect of everyday life, and it's seeping into other sectors, even, including healthcare and consumer products. That, as well as an improving economy's tendency to buoy the tech sector, means good things for BST's 83 holdings, which include the likes of Microsoft (MSFT), Amazon.com (AMZN) and
Just note that BST's 0.89% expense ratio is higher than what you'd expect from, say, an index ETF. That's less a concern, though, in the case of an outperformer such as BST.
Vanguard Information Technology ETF
Market value:
Dividend yield: 1.1%
Expenses: 0.1%
For some investors, the expense line is the bottom line. That's OK. If you want cheap without sacrificing too much quality, you'll want to consider the Vanguard Information Technology ETF (VGT,
VGT's 0.1% expense ratio is very low for a sector-focused fund, and undercuts the XLK - the second largest tech-sector fund by assets - by three basis points. BST has been the better performer, but you're still getting the outstanding performance of a sector that's outstripping the S&P 500 by an annual average of 19.4%-14.1% over the past decade.
Vanguard Information Technology does offer a little bit of yield, primarily via more mature tech firms such as
As long as tech continues its long-term outperformance, VGT - and its shareholders - will benefit. And thanks to low fees, shareholders will be giving back very little of that action.
First Trust Cloud Computing ETF
Market value:
Dividend yield: 0.6%
Expenses: 0.3%
The First Trust Cloud Computing ETF (SKYY,
How does that work in practice? One SKYY holding is
Cloud computing is an increasingly important technological trend that's helping to fill growing needs for high-powered computer processes for companies that simply can't house the infrastructure themselves. As this industry grows, so too should the fortunes of SKYY.
Just understand the risks. This isn't a terribly diversified fund, both in scope and number of holdings (20). So if this market broadly pulls back, SKYY will be particularly susceptible.
iShares Core S&P U.S. Growth ETF
Market value:
Dividend yield: 1.2%
Expenses: 0.04%
If you're looking for more broad-based growth on the cheap, consider the iShares Core S&P
That tiny expense ratio gets you access to more than 550 American growth stocks whose sales expansion exceeds the market average. It's understandably heavy in tech stocks (30.8% of assets), but also has large holdings in health care (18.2%), consumer discretionary (13.7%) and communication (11.2%).
This is primarily a large-cap fund that includes stocks such as
Vanguard Mega Cap Growth ETF
Market value:
Dividend yield: 1.3%
Expenses: 0.07%
Vanguard Mega Cap Growth ETF (MGK,
The holdings should be plenty familiar.
MGK differs a bit from other large-cap growth strategies in that while technology is still high (30.4%) it favors consumer services (22.4%) over healthcare (10.6%). Financials (12.1%) and industrials (12.4%) also feature prominently in this portfolio.
There's nothing novel about this strategy, and it certainly screams "safe" - maybe too safe, at first blush. But the performance is there. MGK has outdone the S&P 500 over every meaningful time period, including a 15.6%-14.1% advantage on average over the past decade.
iShares Russell 1000 Growth ETF
Market value:
Dividend yield: 1.1%
Expenses: 0.2%
You can also head in the other direction, focusing on small caps like those found in the PRDSX, but through a much cheaper index-ETF wrapper.
The iShares Russell 1000 Growth ETF (IWF,
What's perhaps most surprising, though, is IWF's stellar return in such a volatile 2018. Investors typically eschew small-cap companies when market uncertainty is high, as smaller companies tend to have weaker balance sheets, fewer revenue streams and less access to capital than large-cap firms. Yet in a year that has seen the S&P 500 barely return above breakeven, the IWF's army of more than 540 holdings has put together a respectable 3.2% performance.
The ETF's outperformance has also come with less volatility than one might expect from a small-cap fund. IWF's beta (a measure of price swings) is 1.1; anything above 1 is considered more volatile than the S&P 500. Thus, existing shareholders have traded only slightly more volatility for reliably better performance for years.
Invesco DWA Momentum ETF
Market value:
Dividend yield: 0.1%
Expenses: 0.63%
The Invesco DWA Momentum ETF (PDP,
The PDP tracks the Dorsey Wright Technical Leaders Index - a Nasdaq-based index that ignores fundamentals and focuses instead on pure momentum. It essentially scores stocks based on their intermediate- and long-term returns compared to a benchmark index, then selects the 100 best-scoring stocks and weights them by their scores.
This seems to run counter to the idea that past performance isn't indicative of future returns, but PDP's system actually works - sometimes. It does tend to be slightly more volatile than the S&P 500, but not by much. It also tends to work better in certain situations, such as when the market is in recovery mode. PDP outperformed in 2009 and 2010, then again in 2017 following a rocky 2016.
That said, you can't necessarily count on PDP to have a fixed makeup. At the moment, tech stocks are king at 27.9% of the fund, followed by industrials 21.7% and consumer discretionary (18.9%), but the ETF's portfolio will change along with the ebb and flow of the market.
Invesco S&P SmallCap Health Care ETF
Market value:
Dividend yield: 0%
Expenses: 0.29%
The Invesco S&P SmallCap Health Care ETF (PSCH,
PSCH is a portfolio of fewer than 70 small-cap stocks in the health care sector, including providers and services (28.6%), equipment and supplies (25.1%), biotechnology (19.7%), pharmaceuticals (13.3%), health care technology (10.3%) and a smattering of life sciences tools and services.
That biotechnology weight is important, as it helps fold in some of the explosive upside of biotech stocks, which can jump by double digits on a single set of trial data, but doesn't overly expose the fund to the similarly stark downside should a company's lone pipeline drug face a setback.
Invesco S&P SmallCap Health Care - a Morningstar five-star ETF - is a sector fund with turbo. It has greatly outperformed the Health Care Select Sector SPDR ETF (XLV) over every meaningful time period since inception, including a 22.7%-11.1% drubbing year-to-date. The disparity is plenty wide in the trailing three-year (20.1%-10.8%) and five-year (18.4%-12.7%) periods, too.
Advisory Research MLP & Energy Income Fund
Market value:
Dividend yield: 9.4%
Expenses: 1.4%*
Oil was a dog in 2018. While crude oil increased from about
That said, oil-producing companies are starting to rein in production, and recovering economic activity worldwide should help boost demand. That in turn could mean good news for energy companies. Meanwhile, many energy transporters - such as master limited partnerships (MLPs), many of which simply collect fees as oil and gas pass through their infrastructure no matter what the price - are already standing strong against the energy-price downturn.
That seems to bode well for 2019's prospects for the
Fair warning: This fund has seen pretty lackluster performance recently that has dragged on its intermediate-term returns. But an oil recovery in 2019 could mean big things for this income-heavy mutual fund.
* Note: This fund also has a maximum 5.5% sales charge on it's A class shares. Loads and fees differ depending on share class.
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