What is Growth Investing?

Investing in growth stocks can be one of the ways to earn wealth in the stock market. However, the key lies in researching and investing in stocks that aligns with your investment goals. Companies that are considered growth stocks typically operate in a large and expanding market; have sustainable competitive advantage; profitable cash flow; a repeat business model; strong historical price increases and strong leadership. 

As growth stocks are expected to outperform their peers due to strong growth potential of the underlying company, they trade at a high price/earnings (P/E) ratio and may be considered overvalued. Moreover, their stock prices may drastically fluctuate based on the information released about the company, which could be related to sales, revenue or future earnings. Hence, investing in growth stocks may turn out to be risky if the company doesn’t perform well. 

Generally, growth investors have moderate to high risk tolerance with typical investing timeframe ranging from medium to long-term.

Researching the right growth stocks to invest in can be a time-consuming exercise. However, there are a few tools available these days that can help make this process easier. For example, the screener tool, available in WebBroker, can let you create a list of stocks based on certain fundamental criteria and may help you make an educated decision toward building your portfolio.