Definition
Growth Investing
Growth investing focuses on companies expected to grow earnings and revenue much faster than average, even if their valuations look expensive today.
Growth investors prioritise the future trajectory, fast-expanding revenues, large addressable markets, and reinvestment, over current cheapness. They accept high P/E ratios on the belief that rapid earnings growth will justify the price.
In India, growth styles favour sectors like new-age tech, specialty chemicals, and consumption plays. The risk is overpaying: if growth disappoints, richly valued stocks can fall sharply. The GARP approach tries to blend growth with valuation discipline.
Related terms
- Value InvestingValue investing is a style of buying stocks that trade below their intrinsic worth, betting the market will eventually recognise their true value.
- PEG RatioThe PEG ratio divides a stock's P/E ratio by its earnings growth rate, helping judge whether a high P/E is justified by fast growth.
- GARP InvestingGARP (Growth at a Reasonable Price) is a hybrid style that targets companies with solid growth while refusing to overpay for it.
Plain-English explainer from Investdesk Investors Encyclopedia. General information, not financial advice.