{"id":4195,"date":"2021-04-25T21:55:38","date_gmt":"2021-04-25T20:55:38","guid":{"rendered":"https:\/\/www.simtrade.fr\/blog_simtrade\/?p=4195"},"modified":"2021-04-25T21:55:38","modified_gmt":"2021-04-25T20:55:38","slug":"growth-investment-strategy","status":"publish","type":"post","link":"https:\/\/www.simtrade.fr\/blog_simtrade\/growth-investment-strategy\/","title":{"rendered":"Growth investment strategy"},"content":{"rendered":"

Growth Investment strategy<\/h1>\n

\"Akshit<\/a><\/p>\n

This article written by Akshit GUPTA<\/a> (ESSEC Business School, Grande Ecole<\/i> Program – Master in Management, 2019-2022) presents the strategy of Growth Investing<\/em>.<\/p>\n

Introduction<\/h2>\n

Growth investment strategy is an investment style where investors look for companies, industries, sectors, or markets that are rapidly growing and have the future potential to grow at a higher-than-average rate compared to its market or industry average. It is a part of a fundamental investment style where investors look for stocks that can provide short\/long term capital appreciation on their investments rather than mere dividend earnings.<\/p>\n

The growth investment style is the opposite of value investment style and is considered to be an offensive strategy. Value investment strategy is an investment style where investors look for shares that are undervalued by the market. It is rather a defensive strategy where the investors are conservative in approach ad have low risk appetite. An offensive strategy refers to an investment style where investors are actively looking to build up their portfolios by capital appreciations and earn higher than average returns.<\/p>\n

A growth investor is not affected by the company\u2019s current or historical earnings but strictly takes into consideration the company\u2019s future growth potential before investing his\/her money.<\/p>\n

In general, growth investing is less concerned about dividend payments or stable cash inflows and is not preferred by investors who have a low-risk appetite. The income generated by companies having more-than-average growth rates are reinvested in the business to expand their growth potential and are not distributed as dividends to the shareholders. So, the growth investors look for capital appreciations over the period rather than having stable cash inflows.<\/p>\n

For example, a growth investor Mr. X maintains a portfolio A of high growth stocks. The companies that Mr. X target are generally young companies with small market capitalization (between $300 million to $2 billion) and which have the potential to grow exponentially over the coming years. The minimum return expectation of Mr. X hovers around 15%-20% p.a.<\/p>\n

However, the portfolio generated an annual return of 22% while the benchmark index saw an annual return of 14%. When the rate is compounded annually, a growth investor expects to double his\/her money in a period of 5-6 years.<\/p>\n

Indicators to practice Growth investment strategy<\/h2>\n

Although there is no certain set of indicators that can help an investor judge a company\u2019s future growth potential, an investor practicing growth investment style looks for certain fundamental factors of a company before investing his money. Some of the most commonly used growth investment indicators are:<\/p>\n