Can you grow with growth investing?

We’ve compared the differences between growth and value investing. Nevertheless, both strategies deserve a closer look. Here we’ll discuss the fundamentals of growth strategies a little further.

“Growth strategies can be lucrative,” explains Richard Cayne of Meyer International in Bangkok Thailand. “However, you may find yourself taking a greater risk than you normally would or should.”

Growth investments focus on continuing growth

Of course, we all want our investment picks to grow in value. But with growth strategies, we’re looking for companies and sectors that are increasing more than the others. This requires a little educated conjecture. You want to try to get in on the ground floor as quick as possible. Buying Apple decades ago may have been a fabulous idea, now that you look back, but is there still room for growth?

Since time machines probably aren’t available, but growth investors look at different factors. Financially, you can evaluate a company’s earnings, profit margins, share price performance, and price-to-earnings ratio. In addition to finances, you can also evaluate trends in a company’s sector. Does that startup athleticwear company have the staying power of lululemon? Is that new parking app scalable to cities nationwide or internationally?

Risks run high with growth investment strategies

As you can see, with growth strategies, you need to have a higher appetite for risk. Just because a company’s growth has been soaring the last few quarters, it doesn’t mean this will continue. And while the tech and healthcare sectors have been seeing tremendous expansion, would you want to invest in a specific company, or diversify across the sectors?

Some may say that great reward requires great risk, but you should still do your due diligence before embarking on any investment strategy. Furthermore, most growth strategies rely on profits from sales, rather than on dividends for a return on investment. So, not only would you have to pick when to buy, but since selling is how you’ll make money, you’ll need to be able to time your divestment as well.

Growth strategies need attention

Because growth strategies can involve greater risk, you may want to carefully consider various factors before beginning. Since you’ll most likely need to time your buys and sells, how hands-on do you want to be? If you’re more a “set it and forget it” type, you may want to discuss whether you can adapt the benefits of a growth strategy into your overall portfolio. Just because “growth investment strategy” sounds good, this does not mean that it is the best path for you. Consult a trusted expert like Richard Cayne who can help you assess your risk appetite and your investment goals to determine the best strategy for you.