If You're New To Trading Stocks, Then Consider Growth Investing

• Author: Bryan Miller
• Posted: 2024-05-31

For people looking to save for their retirement or just to make a bit of extra money, investing in companies is often one of the best routes to take.

However, investing can often be tricky and there are many different ways in which people can utilize their money. Keeping that in mind, one of the most underrated, but potentially rewarding forms of investment is growth investing.

If you're new to investing and are looking for substantial ways to compound your money, then growth investing might be a good fit for you.

What Is Growth Investing?

Growth investing is a type of investment where you decide to purchase stock in emerging companies, which is to say business enterprises that are largely in their infancy. These stocks help an emerging company grow, improve cash flow, and increase general confidence.

The primary reason people opt for this kind of investment is that emerging companies have the greatest potential for growth. Already established enterprises have often already reached their peak industry performance, meaning that while some growth is still possible, it's not going to be dramatic. By comparison, if a business is just starting out and it has some innovative ideas, it could potentially skyrocket in terms of market share in the near future, increasing the value of its stock exponentially.

Why Is Growth Investing A Good Option?

The largest benefit to growth investing is that when an investment turns out to be good, the ultimate reward is substantial when compared to other forms of investing and is almost unrivaled in terms of returns.

If an investor picks a good company to put their money into, they could easily turn a couple thousand dollars into tens of thousands over the course of a couple years.

This isn't just great for turning a general profit, it can actually play a vital role in the investment strategy of someone just starting out. It can take an extremely long time to build up a portfolio using investment in more well-established companies and since investing is often about long-term growth in particular assets, experiencing a giant boost in stock value at the beginning of an investing venture can actually increase long-term gains substantially.

What to Look for in Emerging Companies

Since emerging companies aren't going to have a lot of history to go on that you can use to determine whether they're a good investment or not, it can be tricky to know what companies you should be investing in, but there are a couple things to be on the lookout for.

Previous Stock Performance

Unless you're purchasing stock as part of a company's IPO, a business should have some sort of record of its previous stock values. If a company's stock has a consistent history of increasing in value over time, it's a pretty good bet that it will increase in the future. It's not a guarantee, but generally speaking previous success is indicative of success continuing into the future.

Have Tested Leadership And Staff

Who's running a company and who's working there are hugely important factors to consider when investing in emerging companies. When individuals who have a history of innovation or success in a particular industry decide to put their weight behind a new initiative or enterprise, that's a great indication that good things are on the horizon. Even if a company itself hasn't seen tremendous gains, if the right people are at the helm that's still a good sign.

Good Return on Equity

Return on Equity (ROE) might possibly be the best investment indicator you could look at. ROE is the rate of profit a company sees in relation to the level of investment it receives. If ROE is relatively level throughout a company's operation, that means that it can effectively turn investments into economically viable operations with a degree of consistency, indicating that it's a very good investment.

Taking The First Step

Investing can be complicated since there are so many different ways you can utilize your money and there are so many options available. It also comes with some degree of risk as well.

However, patience and making the right investments can completely transform your life. Growth investing is one of the better ways you can give a boost to your portfolio early on, ultimately giving you an advantage in the long-run.