How fast your portfolio grows is a question with many answers that depends on your investment goals, risk tolerance, asset allocation and more. The allure of high returns is a powerful force that can often sway your investment strategy in ways you might not expect. For example, assuming a too-high rate of return might inadvertently lead you to under-invest while a more conservative approach may put you on the road to reaching your financial goals more safely.
Portfolio Growth can be achieved in several different ways, from compound interest to reinvesting dividends or earnings from your investments. Generally, growth refers to an increase in the value of your assets over time.
One of the best ways to protect your portfolio from extreme market declines is diversification – investing in different types of assets that move differently from each other. This reduces your overall investment risk by reducing the magnitude of a loss in any single investment or group of investments.
The Growth Portfolio
A growth portfolio seeks to grow the value of an investor’s investments at a faster pace than other models. This is typically done by investing in stocks with the potential to experience large short-term price fluctuations. These stocks are usually in companies that don’t pay dividends or reinvest their profits, and they might also include speculative investments like cryptocurrencies. The goal of a growth portfolio is to achieve substantial gains with a reasonable level of risk, and it’s most appropriate for younger investors who have a higher risk tolerance and a long-term investment time horizon.