Learn the best ways to find the best aggressive stocks to buy for your diversified portfolio, while adding the least amount of risk

An aggressive stock is a higher-risk investment that can potentially produce higher returns than more conservative stocks, but also has the potential for bigger losses.

However, if you choose the right aggressive stocks to buy, they can offer you the opportunity to earn bigger returns without exposing you to excessive risk.

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Look in riskier sectors to find aggressive stocks to buy for your portfolio

Compared to a conservative investor, you may choose to invest more heavily in Manufacturing and Resources, the two riskiest sectors. If so, take care to spread your money out across the many industry groups within each of these sectors. That way, you protect yourself from an unforeseeable industry downturn.

As well, when holding aggressive investments in Resource and Manufacturing, we continue to recommend picking the top companies in these sectors. For example, if you want to hold gold as an aggressive investment, we’d recommend that you hold gold mining companies that continue to increase production and generate cash flow even when gold prices are low.

Another key part of our philosophy is to downplay stocks that are in the media/broker limelight, since it fosters bloated investor expectations. When stocks fail to live up to those expectations, big downturns can follow.

Applying the Successful Investor philosophy to aggressive investments also leads us to stay out of most new issues or IPOs. That’s because most new issues come to market when it’s a good time for the company or insiders to sell. That’s rarely a good time for you to buy.

Look for hidden value when you search for aggressive stocks to buy—value that attracts far less investor attention than it deserves.

Hidden assets can consist of real estate or underused brand names. For example, companies often carry their real-estate assets on the corporate books at their purchase price, even though their value may have multiplied many times over the years. The purchase price goes on its balance sheet as the historical value of the asset. Over a period of years or decades, the market value of that real estate may climb substantially. But the historical purchase price remains unchanged on the balance sheet.

For example, a company’s real estate can come to exceed the market value of its stock. These types of hidden assets may only become apparent to investors when the company upgrades the use of the real estate. For example, a merchandiser might re-purpose a parking lot to build a shopping mall with a residential condo tower on higher floors, and a parking garage down below.

One of today’s best-hidden assets in aggressive investing is research and development spending by technology stocks. High research and development budgets let tech stocks keep adding profitable new products to their lines and improving existing ones.

Looking for hidden value can produce huge profits—and when you lose, you generally don’t lose that much. That can cut the risk of investing in aggressive stocks.

Learn how to put aggressive growth stock funds into your portfolio

Our favorite aggressive growth stock funds (mutual funds or lower-cost ETFs) are the sort that invest in well-established companies that dominate or a least are major competitors in their markets.

You should avoid aggressive growth funds that hold a lot of concept stocks, or that do a lot of trading, or that delve into options or futures trading.

In general, there are three big mistakes that investors can make when investing in aggressive growth stock funds:

• Investing to much of your overall portfolio in aggressive stocks
• Picking funds that hold too many stocks with high dividend yields without confirming their dividend sustainability
• Not looking for stocks with hidden assets

Limit aggressive investments you hold to a smaller part of your portfolio

Ultimately, of course, the percentage of your portfolio that should be held in either conservative or aggressive investments depends on your personal circumstances. An investor with a longer time horizon or without the need for current income from a portfolio can invest more money in aggressive investing stocks. But we think they should comprise only a smaller part of most portfolios.

Use our “sell-half” rule with more aggressive stocks

Selling half of your hot stocks that surge helps you guard your profits. But apply this rule to more aggressive stocks only, and not to the well-established stocks that may surprise you by going a lot higher in the long run.

Whether your approach to investing is conservative or aggressive, the quality of your investments matters much more than your skill at selling.

However, you should be quicker to sell aggressive stocks than conservative ones. With stocks we rate as “Speculative” or “Start-up,” it pays to apply our sell-half rule. That’s when you sell half of a stock that doubles in price.

Fit aggressive stocks to buy into our overall three-part Successful Investor strategy:

1. Invest mainly in well-established, dividend-paying companies;
2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
3. Downplay or avoid stocks in the broker/media limelight.

What inspires you to invest more aggressively?

What features do you look for in aggressive stocks?