Growth investing
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Growth investing is a type of
However, some notable investors such as
Also influential in shaping this investment style was Phil Fisher, whose 1958 book "Common Stocks and Uncommon Profits" is still today a reference for identifying growth companies.
Distinguishing growth from value investing
In contrast to value investing, growth investing is when the investor chooses a company that has yet to reach its full potential to invest in. This type of investing requires the investor to do a lot of research to find companies that have the potential to grow rapidly and compete with other, often larger companies within its given field. Instead of investing in an already established company, the investor takes a higher risk in hopes that the company grows and makes them money.
Growth companies are companies that have the potential to grow at a rate that is higher than the market average. Larger companies typically pay dividends to their stockholders, but growth companies will often reinvest their earnings in effort to grow the company. These companies are becoming more popular to invest in because they show great potential. This potential typically roots from the company offering a unique or advanced product that is ahead of their competitor’s products.
Growth at reasonable price
"Growth at a reasonable price" is a strategy that blends aspects of growth and value investing. Investors seeking growth at a reasonable price look for stocks that they believe will deliver above-average growth, but that are not too expensive.
After the bursting of the dotcom bubble, "growth at any price" has fallen from favor. Attaching a high price to a security in the hope of high growth may be risky, since if the growth rate fails to live up to expectations, the price of the security can plummet. It is often more fashionable now to seek out stocks with high growth rates that are trading at reasonable valuations.
Growth investment vehicles
There are many ways to execute a growth investment strategy.[6] Some of these include:
- Emerging markets
- Recovery shares
- Blue chips
- Internet and technology stocks
- Smaller companies
- Special situations
See also
- Value investing
- Quality investing
- Kenneth L. Fisher
- David Dodd
- Warren Buffett
- Growth stock
- Magic formula investing
References
- ^ "What's the difference between growth investing and value investing?". us.axa.com. AXA Advisors. Retrieved 5 January 2015.
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- ^ Buffett, Warren. "To the Shareholders of Berkshire Hathaway Inc. (1992)". Retrieved 14 January 2016.
- ^ Tilson, Whitney. "Berkshire Hathaway Annual Meeting Notes (2003))". Retrieved 13 March 2016.
- ^ Buffett, Warren. "To the Shareholders of Berkshire Hathaway Inc. (1989)". Retrieved 13 March 2016.
- ^ "GlPS Standards for Financial Advisors". Arroyo Investment Group | Pasadena Financial Advisors. 2018-03-07. Retrieved 2021-09-19.
External links
- Growth Invest website