I can’t believe it’s February already! This week we define growth investing and talk about some of the risks associated with it.
Growth Investing is the strategy of finding stocks with strong history of revenue growth, growing markets and innovative products and services.
Because of the emphasis the growth investor is placing on future performance there are additional risks that come from this type of investing.
Growth stocks can be identified by a high Price to Earnings ratio. This indicates investors are willing to pay a lot of money for a stock with the expectation that earnings will rise in the future.
If the company fails to meet expectations the price of the stock might fall dramatically. We’ve seen this a lot over the last year. All these tech companies missing earnings with waning demand.
Obviously no investment strategy is perfect or without risk so it is important to select one that meets your needs. Growth investing tends to be more suited to an investor with a higher risk tolerance. As always before you make any investment decision do your own research or speak to a professional.
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