When it comes to investing, you will find that most people refer to growth stocks and value stocks. This article will look at the basics of growth stocks, and consider some investing strategies that might be better suited for growth stocks.
What are growth stocks?
Growth stocks are those stock investments that are expected to grow in value at a rapid rate. They represent companies that are starting up, or maybe that are in a period of rapid expansion. Growth stocks are often connected with new technologies and new industries. There is a great deal of potential for these stocks. Many growth stocks are those from companies with small capitalization. This means that they don't have a lot of capital as yet, but there is great potential there.
Growth stocks are considered to be risky. While value stocks are those from proven companies with large capital inflows, growth stocks are usually from companies that have yet to prove themselves. They could easily bomb, rather than grow. Indeed, the price swings in growth stocks are generally much wider than the price swings in value stocks.
Investing in growth stocks
It is important, when you are investing in growth stocks, to carefully consider the company. Will it last? Does it provide a viable product? Is it really poised to take off? Some of these questions can't be easily answered. You may have to just go for it. For those with a high emotional and financial risk tolerance, it can be a good thing to investing in growth stocks.
But investing in growth stocks isn't for everyone. There are those who get anxious about their investments. The wild swings in stock value may be too much for such investors. Additionally, if you already have an acceptable amount of risk in your investment portfolio, it might not be advisable to add more. It is important to carefully evaluate whether growth stocks really are for you.
Growth stocks, when they take off, tend to do so very quickly. An element of market timing (which is difficult and should not be attempted by beginners) is needed in order to successfully invest in growth stocks. You can make good money by investing in growth stocks, but there is also a greater risk of loss.
Disclaimer: I am not an investment professional. This should not be construed as investment advice. All investment carries the risk of loss. Before investing, do your own research and/or consult with an investment professional.
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