Build your portfolio with high-growth investments.
Value stocks can offer some reassurance in a down market compared with the increased volatility often associated with high-growth stocks. When taking a long-term view, accounting for market cycles, investing in stocks with growth potential can pay off. “The outlook for growth stocks remains favorable going into 2019,” says Michael Stritch, chief investment officer and national head of investments at BMO Wealth Management. During periods of elevated risk, “growth stocks tend to outperform as investors seek safety and stability of earnings.” Positioning high-growth investments in a retirement account allows for tax-deferred growth or in the case of a Roth individual retirement account, tax-free distributions. Here are eight of the best high-growth investments for retirement.
PrimeCap Odyssey Growth Fund (ticker: POGRX)
Allen Kim, director of investment solutions at Kayne Anderson Rudnick, says the current market is characterized by several themes. “Volatility seems to be the result of rising rates and trade policy uncertainty, as the economy seems to have hit a short-term peak in corporate earnings growth.” For retirement investors, Kim says it may be beneficial for investors to turn their attention to tech-focused high-growth stocks. POGRX offers “a fundamental bottom-up strategy with a healthy dose of innovative health care companies and information technology firms in the portfolio,” he says. “While the short-term volatility has led to a more aggressive profile of the fund, the long-term returns have been exemplary and richly rewarded its investors.”
Vanguard Total Stock Market ETF (VTI)
Growth-stock mutual funds can offer low-cost access to the broader market, promoting growth while increasing diversification. “VTI offers broad-based exposure to the U.S. stock market,” says Curtis Holden, senior investment officer at Tanglewood Total Wealth Management in Houston. “The U.S. continues to be the world’s premier investment market and corporate tax reform only helps to increase the competitiveness of our stocks.” VTI is 100 percent equity-based, “so investors will be fully exposed to the twists and turns of the markets,” Holden says. But “unless you’re five years or less from retirement, you shouldn’t be preoccupied with the daily movements of the market.”
Mastercard (MA)
Technology has been a major growth driver in the financial services sector. Brian Milligan, lead portfolio manager of the Ave Maria Growth Funds for Schwartz Investment Counsel, says MA is a stock with growth potential that has benefited from that tech push. “There is plenty of growth with cash still the major competitor,” Milligan says. “Operating leverage is strong, especially if excluding growth expenses.”
Visa (V)
Milligan says the factors that make MA a good growth stock choice likewise apply to V. The biggest risk, he says, is regulation as both MA and V deal with hundreds of legal and regulatory frameworks on a global scale. Milligan says the high level of trust associated with both brands and the continuing evolution of payment technologies will continue to generate new growth avenues for both companies. As merchant acceptance increases and the per transaction cost of sending money decreases, each of these stock’s payment network becomes more valuable.
Robo Global Robotics & Automation Index ETF (ROBO)
Experts generally agree that diversification is important in a goal-based retirement investing strategy. Emerging technology companies may have particularly bright outlooks for expansion. “We are now entering a period of unprecedented innovation, growth and prosperity in robotics, automation and artificial intelligence,” says Chris Buck, head of capital markets and sales at ROBO Global. He says the rate of growth for robotics, automation and AI is exponential. As more industries adopt these technologies, it presents an opportunity for medium- to long-term investors and retirement savers.
T. Rowe Price International Discover Fund (TIDDX)
T. Rowe Price offers a wide selection of target-date funds for retirement, many of which are concentrated in U.S. stocks. TIDDX looks beyond domestic equities to generate growth for retirement investors, financial advisors say. “TIDDX has a 20-year track record of delivering outsized returns from mid- to small-cap international investments,” Kim says. “The fund readily invests in growth stocks of both emerging and developed countries, and in companies with profitable growth and expanding market share.” Regionally, the bulk of the fund is represented by European companies, such as the United Kingdom, Germany and Spain. But China accounted for 10.2 percent of this fund’s holdings as of December 2018.
SBA Communications (SBAC)
SBA Communications owns and operates wireless infrastructure, forming an oligopoly with two other cell tower operators: American Tower (AMT) and Crown Castle International (CCI). Milligan says SBAC is a wide-moat company, meaning it has intrinsic advantages that make it difficult for competitors to erode its market share. “SBAC is probably the best capital allocator of the three tower companies,” he says. “There are still solid growth opportunities with the legacy business, plus the potential for additional growth from international and newer technologies that utilize the wireless infrastructure.” The monetary and nonmonetary-switching costs that wireless carriers incur to change towers can be prohibitive, providing a stable revenue stream for SBAC.
ARK Innovation ETF (ARKK)
Exchange-traded funds are by and large designed for passive investing, but ARKK is a forward-thinking growth ETF that utilizes an active management strategy. Kim says ARKK is “a compilation of best ideas from other ETFs managed by the ARK team,” which includes Next Generation Internet, industrial innovation, genomic revolution and 3D printing strategies. “The active management strategy of ARKK can yield results similar to that of an open-end mutual fund,” Kim says. “Yet it has a built-in advantage in that the ETF structure allows for like-kind creation and redemption of the underlying stocks, which tend to save on capital gains distribution when compared to traditional open-ended funds.”
Choose these retirement investments for your portfolio.
To recap, the best eight growth investments for retirement include:
— PrimeCap Odyssey Growth Fund (POGRX)
— Vanguard Total Stock Market ETF (VTI)
— Mastercard (MA)
— Visa (V)
— Robo Global Robotics & Automation Index ETF (ROBO)
— T. Rowe Price International Discover Fund (TIDDX)
— SBA Communications (SBAC)
— ARK Innovation ETF (ARKK)
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8 Best High-Growth Investments for Your Retirement Account originally appeared on usnews.com
