Aggressive investing is not commonly associated with Vanguard funds. When thinking of Vanguard, what likely comes to mind first is low-cost, conservative-to-moderate risk, plain vanilla index funds that can outperform the more exciting aggressive funds over time.
While this is partially true, Vanguard offers some of the best aggressive growth funds because they also benefit from that same low-cost, long-term performance edge associated with the Vanguard brand.
Aggressive growth funds typically have capital appreciation as the primary objective. They also tend to be more volatile, with big potential gains during periods of economic growth and big potential declines in price during weak economic times.
The current economic environment is positive for growth stocks, which are leading the broader market in 2015.
Here are three of the best Vanguard funds for aggressive investors:
Best Vanguard Funds for Aggressive Investors: Vanguard Growth Index (VIGRX)
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Top sectors include technology, consumer cyclicals, health care, and financials. Top holdings include Apple Inc (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), and Walt Disney Co (NYSE:DIS).
The Growth Index fund once tracked the MSCI US Prime Market Growth Index but on April 16, 2013, it changed to the CRSP US Large Cap Growth Index.
Thus far the change in bogey appears to be working. VIGRX returns rank in the top third or top quartile for the one-, three-, five- and 10-year periods, compared to large-growth category peers. This is an upward trend, considering the 49th percentile rank for 15-year returns.
The expense ratio is cheap at 0.23% and the minimum initial investment is $3,000.
Best Vanguard Funds for Aggressive Investors: Vanguard Mid-Cap Growth Index (VMGIX)
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As I said in a recent story on the best mid-cap growth mutual funds to buy now, the market and economic environments are shaping up to be ideal for mid-cap stocks and growth stocks, which makes now a great time to buy mid-cap growth mutual funds.
The reasoning is that the late phase of a business cycle tends to favor fast-growing companies, while performance of the biggest of large-caps, which usually have multi-national business operations, tend to get bogged down by a strong dollar.
For example, year-to-date, VMGIX is up 6.4%, which is triple the 2.1% gain on the S&P 500 index. The one-, three- and five-year returns for VMGIX are in the top quartile compared to other mid-cap growth funds.
The expense ratio is a low 0.23% and the minimum initial investment is $3,000.
Best Vanguard Funds for Aggressive Investors: Vanguard Explorer (VEXPX)
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If you want to turn up the growth potential and you want to go all-the-way aggressive, look no further than Vanguard Explorer (MUTF:VEXPX).
Classified as a small-cap growth stock fund, VEXPX uses a fundamental approach to pick the best of the Russell 2500 Index, which measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid-cap.”
This blend of small-cap and mid-cap growth stocks makes for a solid combination of the fastest-growing stocks in the market.
Although small caps had a tough 2014, losing to mid- and large caps, the smaller companies are leading the big ones in 2015. VEXPX has a year-to-date gain of 6.9%, which crushes the 2.1% gain on the S&P 500 Index.
Aggressive funds like Vanguard Explorer could maintain their performance lead in the short-term but they can also have steeper price declines than the broader market in tough economic periods.
The expense ratio for VEXPX is low for a small-cap fund at 0.51%. The minimum initial investment is $3,000.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.
