There are many ways to achieve growth in your portfolio. Below, we list down the most common and most effective ones that you can try if you want to see stellar growth in your portfolio.
Buy and Hold
Buying and then holding on to investments is arguably the simplest strategy for achieving growth, and over time it can also be one of the most effective. Those investors who simply buy stocks and other growth investments and keep them in their portfolios with only minor tracking and monitoring are often surprised with the results of this strategy.
An investor who uses buy and hold strategy is usually not easily worried with short term price fluctuations and technical indicators.
Investing in Growth Sectors
Investors who want aggressive growth can look to sectors of the economy like technology, healthcare, construction, and small-cap stocks to get higher than average returns in exchange for greater risk and volatility. Some of the risks can be offset with longer holding periods and careful investment selection.
Market Timing
Those who follow and track the market or specific investments more closely can beat the buy and hold strategy if they are able to time the markets correctly and properly and consistently buy when the prices are low and sell when they are high.
This strategy will obviously yield much higher returns than simply holding on to an investment over time, but it also requires the ability to correctly measure the markets.
For the average investor who does not have the time to monitor the market on a daily basis, it may be better to avoid doing market timing and instead concentrate on other investing strategies more geared for the longer term.
Dogs of the Dow
The “dogs” of the Dow are simply the 10 companies in the Dow Jones Industrial Average that have the lowest dividends yields. Those who buy these assets at the beginning of the year and then adjust their portfolios annually have usually beaten the return of the index over time.
Diversification
This strategy is frequently combine with the buy and hold strategy. Many different types of risks including company risks can be reduced or even gotten rid of through thorough and proper diversification.
Numerous studies have already proven that asset allocation is one of the most important and key factors in investment return, especially over longer periods of time.
The right mix of stocks, bonds, and cash can enable a portfolio to grow with much less risk and volatility than a portfolio that is invested completely in stocks. Diversification works in part because when one asset class is performing poorly, another one will do well and save the day and the portfolio.
Dollar-Cost Averaging (DCA)
Dollar-cost averaging is a common investment strategy that is used most often with mutual funds. An investor will allocate a specific dollar amount that is used periodically to purchase shares of one or more specific funds.
Because the price of the funds will vary from one purchase to the next one, the investor is able to lower the overall cost basis of the shares because fewer shares will be bought in a time when the fund price is higher, and more shares are bought when the price slumps.
