Growth Investing

[RaraFony]

Growth Investing

In contrast to value investing, growth investing involves selecting companies that investors have yet to reach their full investment potential. This type of investing requires investors to do a lot of research to find companies that are growing rapidly in a given industry and have the potential to compete with other, often larger, companies. Instead of investing in established companies, investors take on greater risk in the hope that the company will grow and become profitable.

A growth company is a company that has the potential to grow at a higher rate than the market average. While larger companies typically pay dividends to shareholders, growth companies often reinvest their earnings to grow the company. These companies are more popular to invest in because they show great potential. This potential usually comes from companies that offer unique or advanced products that are ahead of their competitors.

“Growth at a fair price” is a strategy that mixes aspects of growth and value investing. Investors who seek growth at a fair price look for stocks that they believe will provide above-average growth but are not too expensive.

After the dot-com bubble burst, “growth at any price” fell out of favor. Pricing a security high in hopes of high growth can be dangerous. Because if growth rates fall short of expectations, stock prices can crash. It is more fashionable now to look for stocks with high growth rates that are trading at reasonable valuations.