Growth Investing
An investment strategy focused on companies expected to grow at an above-average rate compared to the market.
Definition
Growth investing is a strategy that focuses on companies expected to grow their revenue and earnings at a faster rate than the overall market. Growth investors prioritize future potential over current valuation, often paying premium prices (high P/E ratios) for companies with strong revenue growth, expanding market share, and innovative products. Classic growth sectors include technology, biotech, and e-commerce. Growth stocks typically reinvest profits rather than paying dividends. Companies like Amazon, Tesla, and Nvidia have been quintessential growth stocks. The risk is that high expectations are already priced in — if growth disappoints, the stock can decline sharply. Growth investing has outperformed value investing significantly since 2010, though historical cycles suggest this may reverse.
Related Terms
Value Investing
An investment strategy focused on buying undervalued securities trading below their intrinsic worth.
InvestingP/E Ratio (Price-to-Earnings)
A valuation ratio comparing a company's stock price to its earnings per share.
InvestingMarket Capitalization
The total market value of a company's outstanding shares of stock.
InvestingPortfolio
A collection of financial investments like stocks, bonds, cash, and other assets held by an individual or institution.