HoldingsiShares Core S&P 500 ETF, iShares Core Total USD Bond Market ETF, and more
For new investors, the world of stocks and bonds can be overwhelming. Simply trying to decide which investment you should choose to christen your portfolio can be paralyzing.
How can you break the spell? By choosing a well-diversified allocation fund. The Aggressive Mix — Stash’s name for the iShares Core Growth Allocation exchange-traded fund (ticker: AOR)– is a kind of all-in-one cocktail of stocks, bonds, and cash that can potentially provide investors with broad exposure to the markets.
The Aggressive Mix was designed with two primary goals in mind:
To provide investors with a broadly diversified fund, and to potentially provide higher returns to investors comfortable with taking on a bit more risk. The potential for growth comes with uncertainty, which is why we’ve dubbed the fund “aggressive.”
What’s in the fund?
Aggressive Mix lives up to its name in that it’s a higher-risk, potentially high-reward investment.
That said, the fund itself is what’s known as an allocation fund, which means it provides access to a broad selection of stocks, bonds, and funds, and exposure to different asset classes and geographies. It mostly consists of stocks from Europe (21%), Asia (9%), and the U.S. (62%), from small, midsize and large companies spanning several industries.
The fund’s holdings include several big tech companies like Apple and Amazon, companies in the financial sector like JPMorgan Chase and Bank of America, and many others.
U.S. bonds comprise 27% of the fund, and international bonds are another 11%.
The biggest of Aggressive Mix’s underlying funds–or the funds of which the fund itself is made –include the iShares Core Total USD Bond Market ETF (ticker: IUSB), iShares Core S&P 500 ETF (ticker: IVV), and iShares Core MSCI Intl Mkts ETF (ticker: IDEV).
The fund’s average annual return, since its inception in 2008, is 8.02%, according to the fund prospectus. It’s managed by BlackRock.
Year-to-date, as of May 2018, the fund’s return is -0.91%, according to Morningstar. In 2017, the fund’s annual return was 15.08%, and in 2016, it was 6.68%, according to Morningstar.
It’s worst year was in 2015, when it posted a -1.07% annual return.
There are several other allocation ETFs on the market. One, the Multi-Asset Diversified Income ETF (ticker: MDIV), launched in 2012.
Managed by First Trust, MDIV is a multi-asset income fund, like the Aggressive Mix, and offers broad exposure to the equity and debt markets with a mix of both stocks and bonds. Its mix is more diverse, however, including investments like real estate trusts.
Another, the Vanguard LifeStrategy Moderate Growth Fund (ticker: VSMGX), is built along the same parameters–mainly, it’s designed to be broad and provide investors with strong returns. Its biggest holdings are U.S. stocks, mostly concentrated in the tech and healthcare industries.
The difference in annual return is likely rooted in the funds’ differing holdings. MDIV has a higher weighting in real estate investments than VSGMX, for example, which may partially explain the difference.
Risks and considerations
Aggressive Mix is a growth fund, meaning that it has risks.
Among the obvious risks are that the underlying funds–and the individual bonds and stocks underlying those funds–can underperform when markets are turbulent. Aggressive Mix is a fairly diverse fund, however, which gives investors some wiggle room in the event that markets trend down.
There are also risks associated with the fund’s bonds. Interest rates are increasing in the U.S., which could potentially have a negative impact on bond prices.
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