All Equities Investment Strategy (100% Equities Investment Strategy)

Definition

The term 100% equities strategy refers to the creation of an investment portfolio that consists solely of common stock.  A 100% equities portfolio can be assembled by an investor, or take the form of a pooled account such as a mutual fund.

Explanation

Also known as an all equities investment strategy, a 100% equities strategy is a portfolio that only contains equities, or common stock.  As is the case with aggressive growth strategies, this type of portfolio is better suited to individuals with high risk tolerance scores.  The primary objective of an all equities investment strategy is long-term capital appreciation, meaning growth in the value of the common stock held in the portfolio.

Historically, equities provided investors with higher returns than other asset classes such as bonds and holding cash.  However, the higher returns associated with this strategy come with higher risk, which means the volatility of the portfolio will be greater.  While creating a diversified portfolio can help eliminate individual stock or industry risk, market risk cannot be lowered via diversification.  Investors should be prepared to incur significant losses at times, in addition to the potential for above average gains.

Related Terms

risk of ruin, conservative investing strategy, preservation of capital, 90 - 10 investment strategy, capital growth strategy