What is Growth Investing?

Growth investing is a strategy that seeks to grow your money by investing in companies that have a high potential to increase in terms of capital value in the future.

In terms of appearance, growth stocks are normally smaller or younger companies whose earnings are predicted to increase at an above-average rate when compared to other companies or the overall market. 

A growth investor is focused on the value that they can realise from selling the stock in the future as opposed to any dividends they might receive by owning shares. The payment of dividends is also not a common feature of growth companies as they commonly use shareholder investments to expand their company, hence the name growth stock.

A growth investor is typically interested in historical earnings growth, a rising earnings forecast, robust profit margins and the return on equity (ROE).

Growth investing is frequently confused with Value investing, but with Value investing the focus is on identifying undervalued stocks trading below their intrinsic value whereas Growth investing is outlook orientated and has a lower interest in what the current price of the stock is.

As with all direct investing, it is essential to research the company in question or to seek professional advice in advance.