Growth Investing

DEFINITION of 'Growth Investing'

A strategy whereby an investor seeks out stocks with what they deem good growth potential. In most cases a growth stock is defined as a company whose earnings are expected to grow at an above-average rate compared to its industry or the overall market.

BREAKING DOWN 'Growth Investing'

Growth investors often call growth investing a capital growth strategy, since investors seek to maximize their capital gains.

Although it is often said that growth investing and value investing are diametrically opposed, a better way to view these two strategies is to consider a quote by Warren Buffett: "growth and value investing are joined at the hip". Another very famous investor, Peter Lynch, pioneered a hybrid of growth and value investing with what is now commonly referred to as a "growth at a reasonable price (GARP)" strategy.

RELATED TERMS
  1. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  2. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  3. Investment Philosophy

    A set of guiding principles that inform and shape an individual's ...
  4. Growth Fund

    A diversified portfolio of stocks that has capital appreciation ...
  5. Growth At A Reasonable Price - ...

    An equity investment strategy that seeks to combine tenets of ...
  6. Value Stock

    A stock that tends to trade at a lower price relative to it's ...
Related Articles
  1. Mutual Funds & ETFs

    The 5 Best American Funds

    Discover five of the best-performing mutual funds offered by American Funds, based on the funds' five-year average annualized returns.
  2. Investing Basics

    Investing in Growth Vs. Value in 2016

    Examine the arguments and implications for a value-investing strategy versus a growth-investing strategy as the stock market enters 2016.
  3. Mutual Funds & ETFs

    The Top 3 Growth ETFs for 2016

    Discover why experts and analysts encourage investors to focus on growth, and learn more about the top three growth-oriented ETFs for 2016.
  4. Mutual Funds & ETFs

    Top 4 Diversified Emerging Market Mutual Funds (NEWFX, VEIEX)

    Explore analysis of the top diversified emerging market mutual funds, and learn about their modern portfolio theory statistics, characteristics and suitability.
  5. Stock Analysis

    Best Stocks to Buy for Less Than $5 (FCEL, MEET)

    Learn more about interesting small-cap stocks, selling for less than $5 per share, that investors may wish to consider adding to their portfolio.
  6. Markets

    Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.
  7. Retirement

    Thomas Rowe Price: Always Right

    This great investor mastered a new type of investing with every new market he faced.
  8. Investing

    Venturing Into Early-Stage Growth Stocks

    Picking these potential winners is all about sizing up risk. We show you how.
  9. Investing

    Steady Growth Stocks Win The Race

    Take a page from the fable of the tortoise and the hare by investing in these constant growth stocks.
  10. Active Trading

    Sell Growth Stocks The IBD Way

    Savvy investing is all about learning some smart rules and sticking to them. We give you the rundown.
RELATED FAQS
  1. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>
  2. How attractive is the retail sector for a growth investor?

    Retail is an attractive sector for a growth investor due to its propensity for turning in bigger-than-average gains when ... Read Full Answer >>
  3. Why does the real estate sector appeal to growth investors?

    Growth investing is an investment strategy aimed at identifying stocks with strong potential for growth and capital gains. ... Read Full Answer >>
  4. What factors drive share prices in the real estate sector?

    The health and growth of share prices of companies in the real estate sector are closely tied to the overall health and growth ... Read Full Answer >>
  5. Which segments of the chemicals sector are showing the fastest growth?

    Chemicals sector segments showing the fastest growth as of 2015 are agricultural chemicals, specialty chemicals and pharmaceuticals. ... Read Full Answer >>
  6. What happens to the intangible assets of a company when it is bought or sold?

    Some of the best sectors for an investor seeking high annual returns to consider are health care, consumer cyclical and technology. ... Read Full Answer >>
  7. Why are growth investors attracted to the chemicals sector?

    The chemicals sector attracts growth investors because two of its three segments beat the broader market when the market ... Read Full Answer >>
  8. Why would growth investors be attracted to the electronics sector?

    Growth investors gravitate toward the electronics sector because its higher-than-average volatility, particularly in the ... Read Full Answer >>
  9. Why would a growth investor purchase shares of companies in the drug sector?

    The drug sector – particularly its newer, more high-tech biotechnology segment – offers stronger returns than the broader ... Read Full Answer >>
  10. Why do growth investors buy insurance stocks?

    Growth investors buy insurance stocks because as populations age and become more prosperous, there is increased demand for ... Read Full Answer >>
  11. What percentage of a diversified portfolio should be exposed to the aerospace sector?

    Diversification is an effective portfolio management technique used to prevent a sharp decline in an individual company or ... Read Full Answer >>
  12. How can an investor profit from a decline in the aerospace sector?

    Several forms of speculation enable investors to profit from a decline in the aerospace sector. Short selling aerospace stock ... Read Full Answer >>
  13. What are examples of popular companies in the metals and mining sector?

    Some of the most highly traded companies in the metals and mining sector are gold and silver mining stocks, which include ... Read Full Answer >>
  14. Are there ways to invest in gold and get a dividend?

    Although gold stocks are not likely to be generally appealing those focused on income investing, there are gold or more general ... Read Full Answer >>
  15. Is the airline sector commonly included in the portfolio of a growth investor?

    With volatility slightly less than the broader market, the airline sector is not particularly popular among growth investors. ... Read Full Answer >>
  16. How attractive is the internet sector for a growth investor?

    The Internet sector is an attractive sector offering many benefits to a growth investor. Growth investing is an investing ... Read Full Answer >>
  17. Why would growth investors be attracted to the automotive sector?

    Growth investors are attracted to the automotive sector because it offers greater returns than the broader market. Automobile ... Read Full Answer >>
  18. What are the main advantages of fixed income securities?

    Fixed income securities are commonly used to diversify an investor's portfolio, as they reduce the overall risk of an asset ... Read Full Answer >>
  19. What are examples of popular companies in the Internet sector?

    There have been a number of financial fortunes created by highly successful Internet companies. Some of these firms, such ... Read Full Answer >>
  20. How can I hedge my portfolio to protect from a decline in the Internet sector?

    The best portfolio hedges to protect against declines in the Internet sector are non-cyclical sectors, which tend to remain ... Read Full Answer >>
  21. Why should a growth investor consider the metals and mining sector?

    Growth investors consider investing in the metals and mining sector primarily due to the general trends and changing face ... Read Full Answer >>
  22. What are some of the most popular mutual funds for investing in the metals and mining ...

    Mutual funds are one of the many investment options available for growth investors looking for a portfolio that includes ... Read Full Answer >>
  23. What does it mean if a share's market value is significantly higher than its book ...

    If a share’s market value is significantly higher than its book value per common share, this usually indicates investors ... Read Full Answer >>
  24. What is the forest products sector?

    The forest products sector is comprised of companies involved in growing, harvesting and/or processing wood and wood fiber, ... Read Full Answer >>
  25. How can growth investors benefit from investing in the oil & gas sector?

    The value of a company’s stock is typically determined by supply and demand. However, stock prices from oil and gas exploration ... Read Full Answer >>
  26. I've heard some "market gurus" claim returns of up to 400% annually. Is this possible?

    To answer your question in a word: No! Although we wish such a phenomenal investment system were real, the claims you speak ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center