Growth investing

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Growth investing is a style of investment strategy. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios. In typical usage, the term "growth investing" contrasts with the strategy known as value investing.

However, some notable investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth ("Growth and Value Investing are joined at the hip"), in consideration of the concept of an asset's intrinsic value. In addition, when just investing in one style of stocks, diversification could be negatively impacted.

Thomas Rowe Price, Jr. has been called "the father of growth investing".[1]

Growth at reasonable price[edit]

After the bursting of the dotcom bubble, "growth at any price" has fallen from favour. 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[edit]

There are many ways to execute a growth investment strategy. Some of these include:

  • Emerging markets
  • Recovery shares
  • Blue chips
  • Internet and technology stock
  • Smaller companies
  • Special situations
  • Second-hand life policies

See also[edit]

References[edit]

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