When you think of a stock, most people think of a growth stock.  These are the stocks whose price chart starts out on the lower left-hand corner and the price follows some kind and staircase like pattern from lower left to upper right. Growth stocks are fun to own.  Everyone likes a winner. Growth companies report increasing revenues and earnings. They are often beating analyst estimates, reporting new successes, new customer wins, and steady progress. This style of investing has the benefit that throwing in with one of these winners early enough can make you rich.  Just look at the examples of early shareholders of Microsoft, Wal-Mart cashiers who got stock options, or even those investors that believed in Apple when it started its resurrection in 2002. In just 10 years Apple became the largest company by market cap, and more recently exceeding 1 trillion dollars. Everyone knows a story of someone who owned one of these rocket ships and got rich from it.  And for everyone that held on, there are thousands that owned it and sold too early.


Pros:  A single investment in a big winner can make you rich.  Timing your investment in a growth stock is not critically important if you can buy it early enough in the growth phase as invariably a poorly timed purchase can be salvaged by meteoric growth for a sustained period of time.  They are fun to own as they consistently beat earnings estimates and their stock prices are generally on a staircase like uptrend. Everyone likes good news and these companies deliver plenty of it.


Cons: There are never dividends paid by these companies in their early fast growth stages.  You generally are going to pay a high multiple of earnings and feel like you are overpaying.  They are rarely cheap. Everyone likes a winner but that doesn’t always equate to making money.

An excerpt of “The Investment Survival Guide

By: Harvey Sax, Partner at Alpha Wealth Funds