Investing for growth means that you’ll be putting your money in investment products whose value has the potential to rise over time. For example, your P10,000 could be worth P12,000 in a few years-if you choose the right product.
While you may also gain extra money from other sources (like interest or dividends), the rate at which your investment’s value rises is the main thing you will be concerned with. If you’re interested in growth investing, here are 3 things you should do.
1. Understand your needs
First, you’ll have to define the rate of growth you’re looking for. You can find this out by checking your money goal to see how much you’ll need, then calculating how much your investment would need to grow in the time before you’ll use the money.
Will slow but consistent and stable growth be enough for your goal’s success? If so, you may have to face less risk with your money.
Do you need your investment’s value to rise sharply? In that case, you may have to assume more risk. Lowering your money goal is also an option, if having less money would still be OK for you.
2. Find the right products
When you’ve set your desired growth rate, it’ll be time to see what investment products can match it.
Stocks are commonly considered by people who want to do growth investing, because these often do have big potential to rise sharply in value. Of course, not every company’s share price will rise a lot, so you’ll have to do your research to see which ones are likely to do so.
You can also consider putting your money in a pooled fund that has a lot of shares as its assets (like an equity fund, PSEi-tracking fund, or balanced fund). That way, the professional manager will take care of the research and decisions for you.
Pooled funds that do not focus on stocks (like bond funds) can also provide good growth opportunities, although probably not as high as those mentioned earlier. Still, you can consider them if they can match the growth rate you need.
Target date funds are another option. These focus on growth in their early stages and rebalance their portfolio to focus on income generation as the target date nears.
Don’t forget that you should only consider investment products that match your risk profile. This helps keep you from taking on more risk than you would comfortable with.
3. Diversify
Performance is never guaranteed in investing, so you may not get the returns that you expect. In fact, there is a chance that something bad will happen to an industry or asset type that affects everything related.
That’s why diversification is so important. It can help cushion the blow if something bad does happen, because not all of your investments will be affected. To do it, you’ll have to spread your investment money across different companies, industries, and asset types.
If your current portfolio consists of the traditional stocks – funds – bonds mix, you might want to look into adding ETFs or REITs.
