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How Stock Market "Growth" Funds Can Falter Big-Time

"America's most highly valued start-up" drops more than 85% from its peak

by Bob Stokes
Updated: November 14, 2019

As you probably know, stock market mutual funds vary in their investment strategies.

One fund might invest largely in blue chips, while another specializes in small caps. Another might pursue a strategy of only committing capital to "undervalued" stocks. Yet the management of another fund might go the "growth" route by mainly seeking capital appreciation - that is, the rise in the value of certain companies, often in the high-growth phase.

A growth investment strategy is generally deemed to be one of the riskiest.

For example, consider WeWork (officially the We Company). Not long ago -- it was thought of as a wunderkind company with high-growth potential.

Here's what our November Elliott Wave Financial Forecast had to say:

As recently as June, WeWork was considered "America's most highly valued start-up," estimated at $47 billion. By the middle of October, WeWork's very existence was in question. On October 24, the company was bailed out by a $9.5 billion infusion of capital from its biggest outside investor, SoftBank. "WeWork is now valued at around $7 billion, a more than 85% drop from its peak," noted The Washington Post.

The same issue of the Financial Forecast also showed this chart and said:

NoProfit

A Tweet yesterday by a Bloomberg columnist points out that a massive underperformance is occurring in the Morgan Stanley US Growth Fund as well as others that invest in "high growth, no profit private companies."

Mind you, the fund's downtrend has unfolded as the overall stock market has been marching toward all-time record highs.

Other actively managed funds are having a hard time too. As CNBC noted on Oct. 24:

Stock pickers struggling to beat index funds

So, is index investing the way to go, or should investors ignore stocks all together?

Get insights into how our analysts would answer these questions by reviewing our latest stock market analysis, risk-free for 30 days. Look below to get started.

No "Safety in Numbers" in the Stock Market

Financial history shows that the investing "crowd" is almost always on the wrong side of the market at historic turns.

In truth, an investor must think and act independently from the crowd for any hope to financially survive a full market cycle.

Elliott wave analysis is ruthlessly objective -- and helps you to make market decisions that are indeed independent of the crowd.

Learn what our Elliott wave experts are saying about the current market juncture.

You can do so, risk-free