Growth Investing: How to invest [Guide]
Published: December 3, 2020 by Andrew
If your trading strategy favors looking for stocks with a significantly higher average rate of return than the market, you are unknowingly doing Growth Investing.
Now, your instinctive reaction to the above might be, “But isn’t this the classic way to invest?“
Yes, in a way. But Growth Investing is distinguished by the fact that it focuses almost exclusively on (fast) growing companies and sectors.
Betting on early or high-growth companies certainly comes with risks, but with the right diversification, Growth Investing can become a key part of a broader overall strategy.
To invest you need reliable brokers and in this guide, in addition to explaining in detail what Growth Investing is, we will help you choose the most suitable intermediaries for this trading strategy, Brokers such as eToro or those listed below:
Min. Deposit: 50€
Min. Deposit: 100€
Min. Deposit: 50€
Min. Deposit: 250€
Min. Deposit: 100€
Min. Deposit: 250€
Growth Investing: what is it?
Growth Investing is an investment strategy that focuses on companies that have the greatest potential for explosive growth both in terms of size and importance within their sectors.
The stocks that “Growth” investors are looking for often seem expensive or too expensive compared to the income and profits generated by their businesses. However, investors are willing to pay more for these “Growth” stocks due to the potential return they can offer.
There are several examples of companies such as Adobe or Paypal, leaders in their respective sectors that have seen their share price rise rapidly even during 2020, definitely an anomalous year due to the coronavirus pandemic.
Adobe in particular is a clear example of Growth Investing, the stock has made + 1000% in about 7 years, going from $ 50.00 to $ 500.00 per share!
When “Growth” actions fail, on the other hand, they often fail spectacularly. Growth Investing requires a willingness to accept higher levels of risk in the hope of achieving extraordinary returns.
How to do Growth Investing
At this point you will have a question that goes into your head: how can I do Growth Investing?
Investing in stocks requires a good knowledge of the markets and securities on which you are going to invest and Growth Investing is no exception.
But fear not, there are brokers (financial intermediaries) that offer all the necessary support even for novice traders. If, on the other hand, you are already an expert, even better, with the trading platforms offered by the Brokers that we are going to suggest, you can do Growth Investing very profitably!
What are these brokers so special?
First of all, they offer CFDs, contracts that allow you to invest in shares without paying commissions, are safe and regulated (by entities such as CONSOB or CySEC) and provide a Demo account to practice without running risks.
Let’s see these brokers in detail, you don’t have to choose immediately, you can activate the Demo account of each one, it’s free and involves no commitment and no risk.
Obviously we start from eToro, it is the market leading online broker. Its reliability is confirmed by the CONSOB license it possesses and its over 10 million users only increase the trust placed in this intermediary.
eToro has become very popular for its very intuitive trading platform and very rich in tools to analyze the various stocks and help you in choosing the most suitable shares for Growth Investing.
But if you don’t have clear ideas about the stocks to choose, with eToro you can learn from the best traders in the eToro community and copy their investments, automatically and without additional costs.
This automatic investment system is called Copy Trading and offers two great advantages:
- You can follow the strategies of the most experienced traders, especially those who do Growth Investing
- You will get the same returns as the traders you decide to copy.
How is Copy Trading used? Here are the 4 steps you will need to follow:
- Register on eToro and log into the Demo or real account
- In the “People” section, select the traders you want to copy
- Copy Trading will copy the trades of these traders to your account
- Your returns will depend on those of the copied traders.
- Everything works automatically and for free.
Here are some examples of traders you could copy on eToro:
Click here and choose which traders to copy
Start using the eToro Demo account, practice without taking risks even with Copy Trading and if you are comfortable with it, you can switch to real by making a small deposit (minimum € 200).Click here to sign up for free on eToro
If the knowledge and information needed to select the most suitable stocks for Growth Investing seem complex to you, ForexTB has the right solution for you: A Free Trading Course.
ForexTB is a safe broker, authorized by CySEC for all of Europe and always looking for ways to benefit its investors.
The course we have mentioned is an ebook that explains how online trading works and the basics of technical analysis. It will teach you how to invest and show you what to look for to pick the most promising stocks.
The pdf is the most downloaded basic course in the world and what’s more, it’s totally free!Click here and download the Trading Course for free
This Broker allows you to choose between two trading platforms, both free:
- Metatrader 4 is a very technical platform, with a set of professional tools and indicators.
- The web platform is very versatile and allows access from any browser, without downloading or installing anything.
Growth Investing usually focuses on large cap stocks and these stocks often have high prices. However, this does not mean that large capital is required to buy shares like these.
So how do you do it?
The CFDs that are offered by Trade.com and by all the brokers that we have proposed offer the possibility of investing even a few euros on any stock.
Trade.com offers an additional advantage by allowing you to open a real account by depositing only € 100.
With this small deposit you can do Growth Investing by purchasing stocks like Apple or Amazon, without any problem, perhaps investing only 5 or 10 euros in each operation!Register for free on Trade.com and start investing
The platform made available by this Broker is cutting-edge, full of securities of all kinds. Security is guaranteed by the CONSOB authorization.
If you don’t feel ready to make investments, you can start with the Demo account made available by Trade.com. In addition, this broker allows you to download a trading course in pdf format for free.
The course explains the strategies behind online trading, deserves an in-depth reading, we leave you the link to download it:Download the Trading Course for free by clicking here
Growth Investing or Value Investing?
Diversification is the basis of an effective strategy. In fact, prudent investors use a mix of Growth and Value Investing to balance their portfolios.
Growth or Value. Evaluating the strengths and weaknesses of these 2 polar opposite investment styles is like choosing between Batman and Superman. You want both.
Both Growth and Value stocks can offer substantial returns for investors, but the 2 schools of thought take different approaches.
- More “expensive”: Stock prices are high relative to sales or profits. This is due to investor expectations, so high price / sales and price / earnings ratios should be expected.
- Riskier: These are expensive stocks because investors expect big things. If the growth plans don’t materialize, the price could plummet.
- Less “expensive”: Stock prices are low relative to sales or profits.
- Less risky: They have already demonstrated the ability to generate profits based on a proven business model. However, share price growth is not constant, much less rapid. But the price is backed up by value and a collapse is unlikely.
Growth Investing: Stocks to buy
For investors interested in a Growth Investing strategy, it is important to identify the stocks that have the best chance of growing in the future.
But how do you know what these titles are?
It is not easy, but historically a series of characteristics unite the Growth Investing shares:
- Part of an expanding industry
- They have a lasting competitive advantage
- Strong financial resilience
- Stable business model
- The growth trend is constant
- They have a strong corporate culture
- They are administered by talented leaders
At the beginning of 2020, the markets were soaring but the outbreak of the pandemic changed everything.
Economists expect a decline in world GDP worse than that seen in 2009, following the subprime mortgage crisis.
Choosing the best Growth Investing stocks in this time of economic crisis is even more important, because these companies could further benefit on the markets, taking advantage of the crisis.
Here are seven of the best Growth Investing stocks that analysts have been focusing on right now:
Of course, remember to diversify, these stocks are gigantic but also risky, at some point the price could excessively overestimate the intrinsic value of the company and turn the tide.
Growth investing books
If you want to learn more about Growth Investing there are books that explain this investment strategy very well, but before buying them we remind you to read the 2 free trading courses we have mentioned in this guide.
They are courses in pdf format that lay the foundation for equity investing and open your mind to the most effective trading strategies, including Growth Investing.
Below you will find two brief introductions to the best Growth Investing books you can find on the market:
Benjamin Graham and the Power of Growth Stocks
The subtitle is: Lost Growth Stock Strategies from the Father of Value Investing
Benjamin Graham and the Power of Growth Stocks is an advanced and practical guide for investors looking for the best “Growth” stocks.
It will help you develop a solid diversified strategy and execute trades for maximum profitability and limited risk.
It is a book that explains everything in a colloquial way, with examples taken from the real world. It also demonstrates how this strategy and its creator Benjamin Graham have been successful in the markets.
Growth Investing in the Stock Market of Davide Elvis Crespi
The subtitle says: How to Spot High Growth Companies and Generate 30% to 300% Returns
Growth Investing is an investment style whose main objective is to identify and purchase shares whose market value will grow over time over the average.
This book explains that a growth investor must develop the ability to select companies that exhibit sustained and continuous growth.
Doing Growth Investing means having understood already in 1997 the potential of Amazon at 1000 $ per share …
Growth investing means taking risks in the hope of getting big rewards.
In this guide we have analyzed this investment strategy, showing you what it is based on and what its advantages and disadvantages are. We also compared Growth with Value Investing, which is certainly less risky.
We have also shown you examples of Growth Investing and which stocks are best suited to this style of trading.
To start you should register on the Broker Demo accounts that we have proposed, do all the tests necessary to learn this strategy without risking anything. When you are more comfortable with Growth Investing, just make a small deposit into the account of the broker you prefer and move on to real investments.
Here are the official links for free access to the Demo accounts of the best online brokers:
- Access the eToro Demo account for free by clicking here
- Register on ForexTB and try the Demo account by clicking here
- Register on Trade.com and try the Demo account by clicking here
Growth Investing means investing in growth, focusing on very high growth stocks.
They have both advantages and disadvantages, the ideal is to use a mix of both strategies.
Of course, but it is also very risky because high growth is often not supported by fundamentals.
You can use CFD brokers such as eToro that offer the possibility of Growth Investing with small capital and without paying commissions.