Investing in blue chip stocks and implementing a dividend reinvestment plan has been the best way to accumulate wealth over the long haul. If you’re willing to spend a lot of time on research, then you can find undervalued small-cap stocks to build your fortune. Another avenue for someone who understands markets well is to create a long/short portfolio. And for those who don’t mind risk, there are leveraged and inverse ETFs.

With all these opportunities, it would seem odd for an aggressive investor to look into mutual funds. However, there are several high-risk/high-reward mutual funds out there, a few of which have been listed below for your convenience. (For related reading, see: Why Are ETFs Fees Lower Than Mutual Funds?)

All numbers below as of Oct. 30, 2015.

Investing in the Unknown

Akre Focus Retail (AKREX) is a mid-cap growth fund that will invest in preferred stocks, warrants, options, and other equity-like instruments. If you look at the fund’s cumulative performance since its inception date of Aug. 31, 2009, you will see that it has appreciated 133.40%. There is no dividend yield, but it features a significant return for a mutual fund. However, if you pay careful attention, you will see that there’s a catch.

Look at that inception date again. Remember that the S&P 500 bottomed in March 2009. Therefore, AKREX could not have been launched at a better time. O.K., it missed the bottom by a few months, but that’s nothing considering a six-year bull run in equities. The point here is that we don’t know how AKREX would perform in a bear market environment whereas we do know the answer to that question with most mutual funds. Additionally, AKREX comes with a 1.35% expense ratio. This might go unnoticed now because investors are making money, but it could be a reason to avoid AKREX if times become more challenging.

That said, while AKREX would likely take a hit in a bear market, we don’t know how resilient it might be. It does invest in companies that possess strong balance sheets, have a competitive advantage over peers, and reinvest capital to grow their businesses organically, which increases the odds of compounding growth. The strong balance sheet and competitive advantages are plusses in any investment environment, but reinvesting capital to grow the business is usually only a positive in bull market environments. If the market trend changes, then you will see a flight to safety as in large-cap dividend-paying stocks. (For related reading, see: What Is the Best Managed Fund for Trading Mid-Cap Stocks?)

Massive Risk/Reward

If you really want to go big and have no fear whatsoever, then you might want to look into Fidelity Select Biotechnology Portfolio (FBIOX). This fund has appreciated 2,218.40% since its inception of Dec. 16, 1985 on a cumulative basis. However, once again, that’s not the whole story.

If you look closer, you will see that almost the entire gain has occurred since 2009, when the Federal Reserve began cutting interest rates and the cheap money era was launched. This has led to a great deal of leverage, especially in biotech. If money is cheap and endless, then of course biotech is going to grow, but much of that growth is based on hope and potential — not reality.

The good news is that management invests in biotech companies with strong financial positions, scientific and/or technological advancements, and a deep pipeline. This means the companies invested in will likely be of high quality. The bad news is that even the best companies are dragged down when its industry plunges.

For the record, I currently own shares of Direxion Daily S&P Biotech Bear 3X ETF (LABD). When I initiate a position, I purchase a small amount of shares and actually hope the stock or ETF will move lower, which will allow me to buy at lower price points, thereby leading to a bigger gain when the position turns around. That's a quick teachable moment, but I ultimately wanted to point out that I don’t believe the biotech rally is sustainable. (For related reading, see: Top BRIC-Related ETFs.)

A Good Strategy

PRIMECAP Odyssey Growth (POGRX) might not be as exciting, but if you’re looking for long-term capital appreciation, relative resiliency, and a small dividend yield, then this might be an option to consider. This fund invests primarily in U.S. companies with above-average EPS growth. POGRX has appreciated 160.23% on a cumulative basis since its inception on Nov. 1, 2004. The fund slipped during the financial crisis, but that eventually proved to be a buying opportunity, as one would expect given management’s strategy.

The problem is that POGRX has a lot of exposure to biotech. Proceed according to what your research turns up. If you seek more safety while being exposed to healthcare, then you might want to look into Vanguard Health Care Inv (VGHCX), which is a long-term capital appreciation fund that invests in companies that sell pharmaceuticals, companies that sell medical devices, or firms that operate hospitals and/or healthcare facilities. It’s not bulletproof by any means, but its expense ratio of 0.34% and its 1.17% dividend yield are bonuses.

The Bottom Line

All of the above mutual funds present risks, but you can’t have reward without risk, which should make some of these mutual funds intriguing to aggressive investors. This isn’t likely to be the best time for an entry point in a mutual fund with an aggressive strategy, but that decision should be based on your own due diligence. (For related reading, see: Can You Become Rich Investing in Mutual Funds?)

Dan Moskowitz doesn't own any of the mutual funds mentioned in this article.

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