What is Growth Investing?


Growth investing is focusing on a company that has demonstrated a track record of high or emerging growth.

If a company has a stock price that has gone up year-on-year over 3 years then that stock would be a target for growth investors. Even on a shorter timeline, if a stock has gone up in price every week for 3 weeks in a row then it would also be a target for growth investors.

Growth investing does not always take into account direct research or financial fundamentals. It may be a reaction to market sentiment.

As an example, if you wear Gap clothes and your friends wear Gap clothes and the stock has gone up every month for the last six months then you know that the overall market sentiment is good and the sentiment at a consumer level is also good. That is why you would by Gap shares if you subscribed to a growth investing philosophy.

The main issue with growth investing is the fear you are buying at the top of the growth curve. The main way to avoid this is to look for long term growth patterns. Ignore growth surges that last one week, or one month or even six months. A solid company with a history of solid growth should be able to demonstrate an upward trend in their share price for a number of years.

Most investing professionals do not rely on growth investing alone. They would look at other indicators that would support a pattern for future growth. Using Gap as an example again, if they are bringing out new lines of clothing, opening new stores and even expanding to different countries then it is clear that Gap is targeting growth as a strategy for the company. Then you know you may have a good stock if you are using a growth investing strategy.

 

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Information is for educational and informational purposes only and is not be interpreted as financial advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.

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