Capital growth strategy involves long-term planning to increase the value of an asset, primarily through stocks. It can be high-risk but potentially high-reward, and portfolios may also include fixed income securities and low-risk items. Risk mitigation is important, and it is best suited to experienced money managers.
Capital growth strategy is a long-term plan to increase the value of an asset. It is a method of maximizing returns with careful planning and the possibility of fairly high risk. This type of portfolio generally consists primarily of stocks. The main objective is to target stocks that are forecast to grow rapidly and outperform the market average. Capital growth strategy portfolios can earn big and sink quickly in value.
A portfolio built using the capital growth strategy will generally consist of stocks, with some fixed income securities, and low-risk items such as money market securities or cash. The fund balance of a portfolio built with the capital growth strategy depends on the needs of the investor. Some factors to consider include investment objectives, investment horizon, and the amount of money to invest. It is also important to consider risk tolerance.
The most aggressive portfolios using the capital growth strategy will consist of most, or even all, of stocks. Investments of this high risk are less common, and a typical portfolio will be 65 to 70 percent in equities. This percentage allows the investor to seek a high return while leaving room for a cushion. Many investors prefer to have some safety funds to balance out the volatility of the stocks. At its core, it is the practice of balancing growth investing with value investing.
A growth-cap strategy portfolio will often have several small- and mid-cap stocks. They are considered growth stocks, which fit well into a long-term strategy. This type of investment will not only grow steadily, but will often exceed the average market rate.
To maximize returns, risk mitigation is often an important part of a capital growth strategy. For this reason, it is a type of investment often best suited to experienced money managers. Managing this type of portfolio successfully requires discipline and careful attention. Managers working with the capital growth strategy must remain alert to dramatic changes in the market.
While aggressive capital growth strategies can provide quick gains, they can also lead to massive declines. For this reason, an investor should approach this type of strategy with a good understanding of the risks involved. A good candidate for the strategy will have several years to invest or will have enough assets to survive a dramatic downturn. Even with a long-term approach, these capital growth investments can be unpredictable enough to cause severe loss.
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