What Is Growth Investing

Growth investing is a strategy of investment that is done by investing in companies that have showed greater-than-average growth compared to other companies, despite the higher prices that shares of these companies often fetch. Growth investment is often done by investors who want a greater sense of security and are attracted by the potential for big returns for their money in a short span of time. The most common vehicles for growth investment strategies include emerging markets, technology stocks, internet stocks, blue chip companies, special situations and second-hand life policies.

Growth investing is not without its share of risks, however. One flaw present in this investment strategy is that the true value of the company is severely neglected and undervalued, with the focus going solely to the current price of shares, which can be driven hype, hysteria, and rumors -- arguably not the best sources of information. Although most companies are stable and eventually live up to the expectations of growth and higher share prices, most companies tank and leave investors with heavy losses. A good example of optimistic growth investing gone bad is the dot com bubble in the late 1990s, when internet stocks soared only to painfully fall back down when the bubble burst.

Growth investing is commonly done in one of two ways:

(1) by individually investing in the shares of companies with potential for growth or ;

(2) by getting the help of an investment manager to do all the work for you.

The first option carries more risk and should be pursued by those who are prepared for the risk of total loss in case the company fails to perform as expected.