What Is Growth Investing?

Growth investing could be a top strategy for most investors, as they will park their money in companies with solid growth potential, enjoying capital appreciation and dividends.

So, for example, despite its meteoric ascent in the last few years, Tesla Motors is still a company with tremendous growth potential because of its attempts to flood the market with affordable electric vehicles and bolster self-driving technology.

Advantages of Growth Investing

• Capital appreciation Investor Rob Baron recently projected that Tesla shares will hit $500 in 2025. This could represent an 89 percent gain in the next two years. Whatever the case, when you find growth stocks, this is the type of capital appreciation you should be looking for, which requires plenty of due diligence.
• High-growth possibilities Investors like growth investing because it provides high-growth possibilities, especially when you get in on the ground floor or purchase a stake at the table before it travels to the moon.
• Emulate the best When you integrate growth investing into your investment endeavors, you are emulating some of the best investors in the business today, such as Peter Lynch, a famous U.S. investor and mutual fund manager.

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Potential Risks of Growth Investing

• Volatility and Risk Growth investing can generally be more volatile and risky than something like value investing, which generally invests in companies that are a sure thing that might be trading below their market value, such as Procter & Gamble, Walmart, or AT&T.
• Difficulty If everyone could predict the future, we would all be rich. That said, predicting future growth rates when you are growth investing is extremely difficult, which can eat into your gains and leave you feeling disheartened.
• Evaluation Finally, one drawback of growth investing is evaluating the valuation of metrics and price-to-earnings ratio. Why? The problem is that these metrics will provide you with very little information about the company's earnings per share (EPS) growth prospects.

Planting Seeds of Success With Growth Investing

Growth investing could yield terrific rewards if you have done your research and due diligence and truly believe in the company's future.

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