You’ve got a lot of money, and you want to make your pot of money even bigger. So you consider using something called a “conservative growth” strategy. The goal is to build wealth over time, with an emphasis on “wealth preservation.”
This is where the debate starts among pundits on what is actually a “conservative growth” strategy. The basic strategy has been an allocation of 60% in bonds and 40% in stocks. But anyone paying attention to 2008 knows what can happen.
If you want to preserve money, the purest way is just to index your money to inflation and get a return on Treasury bonds. But...what's the point of that?
So you’ll see a lot of financial companies create “conservative growth funds.” And these funds charge annual fees that eat into the return. The funds basically build a portfolio of bonds and stocks.. people could have just as easily learned the strategy and built the portfolio by hand in a matter of 20 minutes. Sounds like a plug for a trading course.
Related or Semi-related Video
Finance: What is Capital Appreciation (M...10411 Views
Finance a la shmoop what is capital appreciation as in the sense of an
investment fund or a mutual fund you know that is like what does it mean to
have a mutual fund with a focus on capital appreciation all right people
think more, more assets all right you have capital and yes you [Woman with a vault full of money]
appreciate having that capital but you'd appreciate it more if there was more of
it like it appreciated so a capital appreciation fund is one which focuses
on just growing the assets bigger and bigger don't really care how the capital
gets grown don't necessarily need dividends don't necessarily need minimum
p/e ratios don't necessarily need balance sheet covenants on the
investments you make don't care if it's exposed to the Venezuelan oil companies [Venezuela city landscape]
or the Australian dollar in a cap app fund well you just want the dough to [Money falls into flower pot]
grow and this ethos is in contrast to other flavors of funds which for example
need to throw off cash in the form of dividends like in a growth and income
fund or interest like in a bond fund like you know it's cash people need to
live on right so those have to do a capital appreciation does not so what's
a typical investment in a capital appreciation fund well usually be
something like a mega trend tech stock that just grows or appreciates with time [Man typing on laptop]
and really doesn't throw off much if any of a dividend like Amazon, Netflix
Facebook, Google those guys so think of a capital appreciation fund is the body [Man wearing underpants in a locker room]
builder of the mutual fund world it just wants to grow everywhere
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