How to Manage a Capital Appreciation Fund

If you're looking for adventure in the stock market world, a capital appreciation fund may be just the thing for you. Also called 'aggressive growth' funds, these are high-risk and, you hope, high-payoff funds invested in companies that show high growth potential. To manage a capital appreciation fund, you have to be willing to risk it all--think of the dot-com businesses in the 1990s. You may make a killing or you may get killed, but hey, it's all part of the game, right?

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• High risk tolerance
• Mutual fund manager or brokerage firm
• Fund prospectus

Get Started with Your Capital Appreciation Fund

1. Call your fund manager and tell her you are interested in investing in a capital appreciation or aggressive growth fund.

2. Consider any advice your manager may have about your past risk tolerance, volatility of capital appreciation funds she may be working with and pros and cons of adding the fund to your portfolio.

3. Decide how much money you want to invest in the fund.

4. Read the prospectus or ask your manager to find out if your capital appreciation fund will be investing in IPOs (Initial Public Offerings) or options.

5. Visit the websites of the company or companies involved in your fund to learn as much as possible about them. Also check for editorials or warnings on investment forums about the fund and the companies to learn about their stability and public standing.

6. Learn how long your manager intends to hold on to the fund, so you have a timeline to follow.

7. Watch the market for any fluctuations.

Tips & Warnings

• Pay attention to your fund manager or brokerage for advice about when to buy.
• If you want to invest and manage your funds on your own, follow the market carefully for several months to get a feeling for its current growth (or lack thereof).
• Capital funds are not for the faint of heart or people looking to enhance their retirement fund. They demand a lot of attention to the market and can be time-consuming and stressful for private investors, so getting someone to manage the fund for you may relieve you of some stress.
• Capital appreciation funds tend to follow the stock market. When the market does well so does the fund, but when the market takes a downturn the fund will likely nosedive.
• Capital appreciation funds are frequently referred to as 'volatile.'