Skip to content
Market & Investing

3 Ways to Invest for Potential Growth

"Growth investing" is a strategy that focuses on choosing investments that are expected to grow faster than the broader market.

When designing a portfolio, it helps to think about your specific goals. Investors nearing retirement might be most interested in capital preservation, opting for less risky choices. But those looking to build wealth or accumulate assets for a major expense may be more open to investments with higher return potential, even if that means taking on more risk.

 

Growth stocks, growth-oriented funds and alternatives are all investments that people use with an eye toward building up their assets. Let’s learn more about them.

 

 

 

Growth Stocks

 

Growth stocks are stocks of companies that are expected to increase in value at a faster pace than their peers and/or the overall market. Often, growth stocks are found in industries where companies can rapidly develop new and innovative products and services. Growth stocks usually don’t pay out dividends because company profits are reinvested back into the business.

 

The idea here is simple—you purchase stock during a company’s early stages, or as it is making advancements, and then may reap the benefits of capital appreciation if the company grows.

 

Growth stocks may seem attractive because of the potential for gains, but there’s also the possibility that the company might not grow as anticipated or that the stock could actually lose value for any number of reasons (e.g., change in consumer appetites, emergence of a competitor, management issues, or a broader market downturn). For this reason, growth stocks can be riskier and more volatile than stocks from well-established companies. As such, the time horizon for meeting your investment objectives is one of the most important factors to consider when deciding if, and how much, to allocate to growth stocks.

 

 

 

Growth-Oriented Funds

 

Mutual funds and exchange traded funds (ETFs) are investment funds that might include stocks, bonds and other securities. Growth-oriented funds can invest in a range of growth stocks. Adding a growth fund to your portfolio offers diversification within the broader equity category. With money in several equity "baskets," you may capture returns when certain equity sectors are performing well even if you experience losses while other equity sectors are underperforming.

 

 

 

Alternative Investments

 

Alternative investments fall outside the traditional markets and include real estate, hedge funds, private equity and private credit, along with tangible assets like artwork and even wine. Alternatives are generally considered high-risk, but they also carry high reward potential for qualified investors looking to diversify their portfolios.

 

Hedge funds are similar to mutual funds in that the money in them gets divided across several investments, but they are not regulated in the same way as mutual funds.¹ During a market downturn, hedge fund managers can use sophisticated strategies that might offset losses and potentially generate a return that’s higher than that of traditional stocks and bonds.2

 

Private equity allows investors to invest in companies or startups that are not available in the public market. Those interested in real estate could invest in individual properties or Real Estate Investment Trusts (REITs), where money from many investors gets pooled and put into a portfolio of properties.

 

Alternative investments are generally geared toward high-net-worth investors and may only be available to accredited investors, or those who meet certain income or other net worth requirements. If you are interested in exploring alternatives, a Financial Advisor can discuss the options as well as the possible benefits and risks of each type.

 

 

 

The Bottom Line

 

Growth stocks, growth-oriented funds and alternatives are all used by investors looking to build up their assets. However, with high return potential comes high risk potential, so these must be considered carefully and with the understanding that outcomes are never guaranteed. Again, if you need help figuring out how using growth investments or any other strategy might fit into your plan, a Financial Advisor can be a great resource.

 

 

 

 

 

1 U.S. Securities and Exchange Commission, "Hedge Funds (opens in a new tab)."   Accessed June 28, 2022.

 

2 Morgan Stanley, "Alternative Investments."  Accessed June 28, 2022.

This article has been prepared for informational purposes only. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Individuals are urged to consult their personal tax or legal advisors to understand the tax and legal consequences of any actions, including any implementation of any strategies or investments described herein.

Investors should carefully consider the investment objectives, risks, charges and expenses of a mutual fund/ETF before investing. The prospectus contains this and other information about the mutual fund/ETF. To obtain a prospectus, contact your Financial Advisor or visit the mutual fund/ETF company’s website. Please read the prospectus carefully before investing.

Equity securities may fluctuate in value in response to news on companies, industries, market conditions and the general economic environment. Companies paying dividends can reduce or stop payouts at any time.  Past performance is no guarantee of future results.    Investing in stock securities involves volatility risk, market risk, business risk, and industry risk. The prices of stocks fluctuate. Volatility risk is the chance that the value of a stock will fall. Market risk is the chance that the prices of all stocks will fall due to conditions in the economic environment. Business risk is the chance that a specific company’s stock will fall because of issues affecting it such as the way the company is managed. Industry risk is the chance that a set of factors particular to an industry group will adversely affect stock prices within the industry.

Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are appropriate only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing.

Alternative investments involve complex tax structures, tax inefficient investing, and delays in distributing important tax information. Individual funds have specific risks related to their investment programs that will vary from fund to fund. Clients should consult their own tax and legal advisors as Morgan Stanley Wealth Management does not provide tax or legal advice.

Morgan Stanley Wealth Management is a business of Morgan Stanley Smith Barney LLC.

Hedge funds may involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager.

Private equity interests may be highly illiquid, involve a high degree of risk and be subject to transfer restrictions.

Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

This material may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the Firm has not reviewed the linked site. Equally, except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the Firm takes no responsibility for, and makes no representations or warranties whatsoever as to, the data and information contained therein. Such address or hyperlink (including addresses or hyperlinks to website material of Morgan Stanley Wealth Management) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through the material or the website of the Firm shall be at your own risk and we shall have no liability arising out of, or in connection with, any such referenced website.

Morgan Stanley Wealth Management is a business of Morgan Stanley Smith Barney LLC.

© 2022 Morgan Stanley Smith Barney LLC. Member SIPC.

CRC#  4867254  (08/2022)

View Disclosures Close Disclosures