Definition
The term capital growth strategy refers to the creation of an investment portfolio that seeks to maximize value in the long term. A capital growth portfolio will allocate more than half of the fund's assets to equities.
Explanation
As is the case with an aggressive growth strategy, a capital growth strategy is a portfolio allocation that is willing to take on additional risk in exchange for higher returns. This type of portfolio is better suited to individuals with high risk tolerance scores. Typically, nearly two thirds of the asset's funds will be allocated to equities, such as common stocks, with the remaining money allocated to fixed-income securities, such as bonds, as well as cash. The primary objective of a capital growth investment strategy is long-term capital appreciation, meaning growth in the value of common stocks.
While a capital growth strategy may allocate 60 to 70% of the portfolio's funds to equities, an aggressive growth strategy may allocate nearly all funds to this asset class. The higher returns associated with these strategies come with higher risk, which means the volatility of these portfolios will be greater. Investors should be prepared to incur significant losses at times, in addition to the potential for above average gains.
Related Terms
The term market volatility strategy refers to the approaches investors can take when the market is rising or falling in relatively short timeframes. Market volatility strategies start with the construction of investment portfolios that match the individual's risk profile.
Moneyzine EditorFebruary 8th, 2024
The term dynamic asset allocation refers to an investment approach that actively rebalances the assets in a portfolio in response to market conditions. Dynamic asset allocation typically involves moving the funds from one asset class to another based on the portfolio manager's longer-term performance expectations.Moneyzine EditorJanuary 16th, 2024
Investments do bring profitable returns to investors, but these are associated with some form of risk that may incur losses to investments. A defensive investment strategy saves investors by minimizing these losses and rebalancing the portfolio.
Hristina NikolovskaJanuary 15th, 2024
The term aggressive strategy refers to building an investment portfolio that attempts to increase returns by purchasing a larger proportion of higher-risk securities. It typically involves allocating a large portion of the portfolio's funds to equities.Hristina NikolovskaJanuary 5th, 2024- The term strategic asset allocation refers to an investment approach that rebalances the allocation of assets in a portfolio to achieve a long-term target. Strategic asset allocation typically involves moving the funds from over-performing asset classes to those that are underperforming.Moneyzine EditorSeptember 21st, 2023
