Growth investors focus on the future potential of a company, with less emphasis on the present price. Growth investing is about identifying the companies that are exhibiting behaviours that suggest that they will be tomorrow’s leaders.
This simply means that growth investing is an active attempt to build up your portfolio and generate more return on the capital that you invest. Growth investing is dependent on time horizons and an investor’s appetite for risk. Here are some growth investing tips:
Invest in fast-growing companies
These are usually found in today’s fast-growing industries, where revolutionary new technologies and services are being created. It is advisable to favour lesser-known securities that have yet to reach the point of peak perception. Frequently these will be smaller securities, where there is greater growth potential.
Buy securities with Strong Relative Performance (RP) lines
Relative performance studies are a great way to identify successful companies and to avoid problem companies. Investors should buy securities that are consistently outperforming the market. This is a good indication that they are under accumulation, and that the companies are succeeding. The best growth investing tips come from the performance of the securities themselves.
Use market timing to guide
your growth investing
Be cautious when the broad market is against you and aggressive when it’s with you. Don’t underestimate the power of the market to move securities, both up and down. When market timing indicators are signalling a bull market, don’t delay. The trend is upwards, so securities will be going up! Buy your favourite securities and hang on if the ride is profitable.
Cut losses short
This is the key to ensuring that investors retain enough capital to stay in the game. No matter how hard one tries, they are going to select securities that go against them as soon as they buy them. Investors should get rid of these securities quickly.