Growth investing is investing in companies that are showing signs of growth with the idea that they will continue to grow. These investors closely monitor companies that are growing, buy their stocks and then sell the stock for profit while the company is still on the uphill climb. The key here is timing. While the stock may not have reached it's full potential, you want to sell before it starts to fall again. This will give you the best return on your investment.
But investing in growth stocks has it's challenges. You have to take into consideration that as the company gets bigger it has to do more to achieve growth. A company may have 40 locations starting out, but ten years later they may 1400 locations. To keep a good rate of growth, they are going to have to open thousands of locations each year.
Also, think about what happens when a company starts to grow. The competition heats up and other companies will get into the act. Competition will put a crimp in your profits. While there may be a few companies that are immune to the competition, they are very hard to find.
So how do you find a good company to invest in that is going to make you a decent amount of money? The first thing to do is to always be on the lookout for companies with good growth potential but don't get sucked into paying a steep price. This will eat into your returns.
Work to find a business that has solid barriers against competition. Don't worry if the growth return rate isn't very high. This type of business will be around longer and sustain superior long-term returns. Look for companies that have high quality, unique, products that will be hard to emulate. This will keep the competition low for some time, leading to years of great returns on your investment.
Research is the key. Having a good eye and instinct for growth companies that will stand the test of time doesn't hurt either. Look at a companies product. Try it out for yourself. Get a plan of what that particular company is going to do in the future to sustain growth. Pick the plan apart and analyze it thoroughly. There is no guarantee that investing in a growth stock will make you a ton of money. But it will help a lot if you do your homework and become well informed before you buy.
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