Growth Investing

Boca Raton, Florida Investment Fraud Attorney, Russell L. Forkey, Esq.

There are numerous types of investment philosophies that are used by the investing public and professional advisors. One such investment discipline is referred to as "growth" investing. The purpose of this post is to provide certain general information concerning this strategy. This post is not designed to be complete in all material respects. It is being provided for educational purposes only and should not be relied upon as legal or financial advice. If you have any questions relative to the below discussion, you should contract a qualified professional relative thereto.

Growth Investing:

Growth investors focus on the future potential of a company, with much less emphasis on its present price, which is what a value investor looks for.  Growth investors buy companies that are trading at a higher price than would be acceptable to a value investor.  This is done with the belief that the companies intrinsic worth will grow and therefore exceed their current valuations.   

As the name suggests, growth stocks are companies that grow substantially faster than most companies.  Therefore, growth investors primarily look for young companies, which may involve greater investment risk than more established companies.  The thought being that growth in earnings and/or revenues will lead to an increase in the stock's price.  Generally, growth investors look for companies in rapidly expanding industries.  Growth investors look to profit from increases in a companies stock price and not through dividends as almost all growth companies reinvest their earnings and do not pay dividends.

As with other investment strategies there is no growth investment formula that will lead to absolute success.  Growth investors use certain subjective methods as a framework for their analysis, but these methods must be applied with a company's particular situation in mind.  More specifically, a growth investor must consider the company in relation to its past performance and its industry performance.  The application of growth investor's formula may therefore change from company to company and for industry to industry. 

If your account executive indicates to you that he follows a growth investment discipline, you need to review with him the particular characteristics that he takes into consideration in making his growth investment recommendations to see if his criteria makes sense to you and is something that you are willing to follow.