Investing for growth
Investing for growth means investing in assets that are expected to increase in value over time, with the end goal being growth of your capital, rather than generating a regular income.
For example, your goal could be to grow a £10,000 initial investment into a portfolio worth £15,000. As with any investment, return is not guaranteed and there is a risk that you could lose some or all of your original investment.
Equity investments targeting growth
Portfolios aiming to achieve capital growth tend to consist mainly of equities (stocks and shares), as these generally have the potential to generate higher capital growth over time than other asset classes – although they are also more volatile.
The exact combination of assets you choose will depend on your circumstances, investment goals and attitude to risk. Investing for capital growth should be considered a medium- to long-term commitment (at least five to ten years), to give your capital time to recover from short-term dips in the market. You may want to combine investing for growth with investing for income as part of a wider strategy.
If you're new to investing, buying funds can be a good way to get your portfolio started. Most funds are either managed by an experienced fund manager, or automatically track a share index such as the FTSE 100 (these are known as tracker funds).
An advantage of investing through a fund is that they can allow you to achieve a well balanced and diverse portfolio, even if you're not an expert at picking shares. Diversification is important, because different asset classes behave differently in particular market conditions. If all your money is invested in one type of asset, one market sector or region, a downturn in any of these could seriously deplete your capital. Remember that different investment funds will have different objectives and risks.
The Investment Association defines twenty-five sectors for funds that principally target growth. Fourteen of these are funds that invest mainly in shares (equities):
- UK All Companies
- UK Smaller Companies
- Japanese Smaller Companies
- Asia Pacific Including Japan
- Asia Pacific Excluding Japan
- China / Greater China
- North America
- North American Smaller Companies
- Europe Including UK
- Europe Excluding UK
- European Smaller Companies
- Global Emerging Markets
There are also growth-oriented investment funds in other sectors such as Mixed Asset and Specialist funds.
Building a growth portfolio
There are two routes to starting an investment portfolio: through a financial adviser, or by building your own portfolio (often called DIY investing).
If you use a financial adviser, you can get recommendations of suitable investments for your aims, your risk appetite and your overall financial situation. If you are DIY investing, you will need to take responsibility for ensuring that your portfolio is well balanced.
To help DIY investors choose an investment platform, we have built a comparison tool that lets you weigh up the potential costs of using one of 15 popular investment platforms in the UK:
Last updated: 08 June 2016