Clearly when investing you want to find the very best options for growth. There is little point in placing your money in a portfolio where it won’t increase. If that was your goal the mattress would do just as well. Stocks that fall into the category of optimal investment choices are sometimes referred to as “best of breed”.
While the term “best of breed” is a slang in the investment industry, it is commonly used in the animal world. Coming from the dog show circles where the animal of the highest quality in a breed is awarded the “best of breed” prize, this term is easy to grasp when used in other environments.
To be assessed as “best of breed” stock the investment is reviewed for its revenue growth, market share and corporate governance in comparison with other companies which are in the same business. Because each investor has limited funds to allocate, it is desirable to determine which stocks, within a specific sector, are truly “best of breed” before making the purchase. Ideally capital will only be invested in such funds.
In order to determine which funds are the best there are a number of tools used by investors and portfolio managers. Such tools are easy to find, and by using several together you can significantly narrow your options and reduce your risks. Of course, even a fund which currently qualifies as a “best of breed” may falter and lose that standing if circumstances change. It is always best to diversify one’s assets.