As you know, many people invest in the stock market as a way to save for retirement, secure additional income, or create financial security for themselves and their families. They strive to “put their money to work” as the saying goes. This may be a healthy mindset, and for some people, it’s the whole point of investing.
But “many people” isn’t everybody. There are investors who seek more than simple financial security or saving for retirement. They tend to have a higher tolerance for risk.
I call this type an “aggressive growth investor.” Aggressive growth investors are more akin to the prospectors of yore—the kind of prospector who says, “There’s gold in them hills” and aims to find it. To put it simply, aggressive growth investors tend to be willing to take on more risk for the potential of higher rewards.
The point of this letter, then, is to ask: “Are you an aggressive growth investor?”
To be clear, aggressive growth investing does not equate to gambling. It doesn’t mean abandoning basic investment principles, like supply and demand. Aggressive growth investing may be suitable for people who enjoy watching and participating in the stock market. It may be suitable for people who want to apply those principles for a chance at a home run hit instead of a lifetime full of singles.
In short, aggressive growth investing isn’t about risking your entire portfolio. It’s about exposing a portion of your portfolio to more risk in pursuit of higher investment returns.
That’s the key phrase. All investing comes with some risk, of course, but as a financial advisor, part of my job is to help clients make investment decisions based on their specific level of risk tolerance. Some clients take on very little risk, and yet stay on track toward reaching their financial goals. Other clients take on a lot more risk, due to having a higher risk tolerance, and because their particular goals may demand it.
If you feel an aggressive growth strategy fits with your objectives and risk tolerance—then it’s time to discuss adopting a more aggressive growth strategy.
What does an aggressive growth investment strategy look like?
The answer: a lot like our current strategy. We just take it one step further.
Here’s how it works. As you know, our current strategy involves asking the following questions:
- Should we be investing in the markets at all? We only invest if conditions warrant it. Otherwise, we stay in cash to protect against losses.
- If yes, which markets should we be in? The media likes to refer to “the markets” as a single homogenous entity, but there are many different markets, all specializing in different things or weighted in certain ways. When it’s time to invest, we only want to participate in the strongest possible market(s).
- Which sectors of the market do we focus on? This is where the concept of “relative strength” comes in. Which sectors are the strongest relative to the overall market? Which investment classes are already on the way up, and likely to continue rising? That’s where we want our money to be, by investing in the appropriate ETF (exchange-traded fund) for that sector.
For aggressive growth investors, we add the following question:
- Which stocks in those sectors?
Instead of focusing solely on sectors via ETFs, aggressive growth investing looks at individual stocks. Again, we apply relative strength to the question. Which stocks are strongest relative to other stocks within their sector? For example, if we decide to invest in the technology sector, and determine that Apple looks like a stronger stock than Google, then Apple is what we’ll buy.
This strategy does involve more risk, because it means concentrating more money into fewer stocks rather than using ETFs to spread it across different sectors. But it also gives us a better chance at higher returns if the stocks we select continue to rise in value.
So ask yourself: “Do I want to take on more risk to pursue higher investment returns, or am I comfortable with how things are? Do my financial goals cost a lot more than I currently have, or am I already on track to achieve them? Am I exposing my portfolio to too much risk based on my goals and objectives, or should I be a little more conservative?”
“Am I an aggressive growth investor?”
If the answer is YES, or even MAYBE, then here’s what I propose. Give me a call at 719-630-0600. Let’s take a few minutes to discuss whether a more aggressive growth strategy is right for you. It’s possible we’ll decide that it’s better to keep the status quo. But isn’t a potential home run worth a few minutes on the phone?
If so, let’s talk. Give my office a call today!
