Growth investing
InvestingDefinition
The strategy of buying companies whose revenue and profits are growing fast, even if the stock looks expensive today, on the bet that the growth will keep going and eventually justify the high price. Classic practitioners include Peter Lynch and Philip Fisher.
Growth investors pay a premium for quality businesses with strong moats, accepting that valuations will look scary in the short term. The risk: if growth disappoints even slightly, high-multiple stocks can drop 50% or more in weeks.
Growth investors pay a premium for quality businesses with strong moats, accepting that valuations will look scary in the short term. The risk: if growth disappoints even slightly, high-multiple stocks can drop 50% or more in weeks.
Example
Buying Nvidia at 40 times earnings in 2023 looked expensive by value standards. By 2025 its actual earnings had tripled, so that 'expensive' entry price looks cheap in hindsight. That is the growth bet working.