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Understanding growth investing

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Growth investing is an investment strategy used by growth investors. Growth investing is simply watching the track record of a company and investing in them if they show growth and have a good track record. The companies normally show growth that is well above average for their particular sector.

A good example of growth investing is finding a company that has had a stock price continually go up each year for at least 3 years. This is what the growth investors will look for, some even look at shorter time frames like 3 months or 3 weeks. Growth investors don't always do all the research on the company like typical investors.

Some investors will look at annual reports and financial statements to figure out if that particular stock has value. This helps them gauge the past performance of the entire company and the future outlook for that company. The growth investing method doesn't care so much about all the individual numbers; it cares more for the get rich quick method.

Generally the stocks growth investors are interested in are products they use. Let's say you like Nike products and you always purchase their brand of clothing and shoes. Now, let's say you associate with a lot of people that feel the same way, if you take a look at the stock of Nike and you see they have had steady numbers that are continuing to increase; this is a good investment for you.

The downside to growth investing is that you may be purchasing the stock at the wrong time. You might think you are purchasing the stock when it's on the incline when it's really at the peak and it will be dropping off soon. One way to purchase the stock before it peaks is to look at the product releases from that company. Let's take Apple for example. When they invested the iPod, this would have been a perfect time to purchase their stock because the second the iPod hit the market, it was a phenomenon. Since then, the stock in Apple has continued to rise with each iPod release.

If you don't know much about a certain stock, you should research it a little bit before you buy it, even if you are a growth investor. Ask other businesses if they know about this stock and if they own any shares. Take a look at the long-term growth patterns to avoid buying the stock at its peak. Long-term growth patterns are more than just a month or two, you need numbers from the past year or two.

Growth investing is risky, especially since there are some stocks that tend to peak and quickly drop. Think back to the dotcom stocks in the 90's, people gained a lot of money quickly so more investors started buying the stock right when it peaked and then it went downhill from there. Since this happened, a lot of people have been using some back-up plans with their growth investing method. Some of the backup plans include investing in secure investments like government bonds and gold. These investments will be around to protect you when the stock market plummets and you lose most of your money.

Before you jump over to growth investing; take a look at the future outlook for the company. Do you see some big revenue on the horizon? If you trust this company and they have always shown solid numbers and growth, it may be a wise decision to invest in their stock. Companies that are starting to expand normally make a good growth investment because their numbers should go up for a few months.


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