Capital Growth Strategy

AAA

DEFINITION of 'Capital Growth Strategy'

An asset allocation strategy that seeks to maximize capital appreciation, or the increase in value of a portfolio or asset over the long term.

INVESTOPEDIA EXPLAINS 'Capital Growth Strategy'

Portfolios with the goal of capital growth consist mainly of equities. The exact proportion of equities to the total portfolio will vary according to the individual investor's investment horizon, financial constraints, investment goals and risk tolerance.

In general, a capital growth portfolio will contain approximately 65-70% equities, 20-25% fixed-income securities and the remainder in cash or money market securities. While seeking high returns, this mixture still somewhat protects the investor against a severe loss in portfolio value if the higher-risk equity portion of the portfolio takes a plunge.

Note that an aggressive portfolio strategy also aims to maximize capital growth, but of the total portfolio value, these strategies are of considerably higher risk; sometimes consisting entirely of equities!

RELATED TERMS
  1. Strategic Asset Allocation

    A portfolio strategy that involves setting target allocations ...
  2. Money Market

    A segment of the financial market in which financial instruments ...
  3. Capital Appreciation

    A rise in the value of an asset based on a rise in market price. ...
  4. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  5. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  6. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic ...
RELATED FAQS
  1. What is a "linear" exposure in Value at Risk (VaR) calculation?

    A linear exposure in the value-at-risk, or VaR, calculation is represented by positions in stocks, bonds, commodities or ... Read Full Answer >>
  2. Is the drugs sector better suited for active or passive investment?

    Active management and passive management represent two vastly different approaches to investing. Active investors keep their ... Read Full Answer >>
  3. How does the risk of investing in the aerospace sector compare to the broader market?

    Investing in the aerospace sector is riskier than investing in the broader market. The most accurate measure of sector volatility, ... Read Full Answer >>
  4. What makes the chemicals sector attractive to value investors?

    The chemicals sector is attractive to value investors because it is a capital-intensive sector that can become grossly undervalued ... Read Full Answer >>
  5. Do any markets not exhibit asymmetric information?

    Asymmetric information, when interpreted literally, means that two parties to an economic transaction have different information ... Read Full Answer >>
  6. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Achieving Better Returns In Your Portfolio

    We look at three risk factors that best explain the bulk of equity performance.
  2. Investing Basics

    Achieving Optimal Asset Allocation

    Minimizing risk while maximizing return is any investor's prime goal. The right mix of securities is the key to achieving your optimal asset allocation.
  3. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  4. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  5. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?
  6. Professionals

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
  7. Economics

    Chinese Opportunities For A Changing Child Policy

    China's one-child policy is changing, and investors are looking for ways to cash in. The reform might not have the effects that many anticipate, however.
  8. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.
  9. Investing

    Financial Gifts For Grads: Kindergarten To College

    If you really want to help your grad preparing for the future, consider a present that supports their long-term goals—an early start to financial planning.
  10. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center