What is Capital Growth Strategy?
Capital growth strategy is an aggressive asset management strategy, which aims at maximizing value of the capital or asset. It is a long-term strategy in which the portfolio is mainly constituted of equities. Capital growth strategy is usually a high-risk high-profit strategy which requires extreme money management and discipline.
Usually, a more than 65% of a portfolio based on capital growth strategy is of equities; the exact percentage can vary according to individual goals, portfolio capital and risk tolerance. 20 to 25% capital is allocated for fixed-income securities to limit the overall portfolio risk. More portfolio diversification is achieved through money market securities and keeping money as cash. Most individuals following capital growth strategy prefer growth stocks for investment. Most give preference to mid-cap and small-cap stocks because many of these sector companies show higher growth rate than market average.
The upside of capital growth portfolio management is faster capital appreciation – i.e. increase in asset value with rise in market value. The downside is high risk, high portfolio volatility and unpredictable return. One should properly analyze his financial stability and risk tolerance before adopting this type of portfolio management strategy.
Usually, a more than 65% of a portfolio based on capital growth strategy is of equities; the exact percentage can vary according to individual goals, portfolio capital and risk tolerance. 20 to 25% capital is allocated for fixed-income securities to limit the overall portfolio risk. More portfolio diversification is achieved through money market securities and keeping money as cash. Most individuals following capital growth strategy prefer growth stocks for investment. Most give preference to mid-cap and small-cap stocks because many of these sector companies show higher growth rate than market average.
The upside of capital growth portfolio management is faster capital appreciation – i.e. increase in asset value with rise in market value. The downside is high risk, high portfolio volatility and unpredictable return. One should properly analyze his financial stability and risk tolerance before adopting this type of portfolio management strategy.
|
posted by Daniel Pipitone at
5:51 AM
0 Comments:
Post a Comment
Blog Home Archive List <<Previous - Next >>