Written by A growth stock is a share in a company that is expected to grow at an above-average rate compared to other companies in the market. Growth stocks are typically characterized by companies that reinvest most of their earnings into expanding the business rather than paying dividends. These companies often operate in high-growth sectors like technology, biotechnology, or consumer discretionary goods.
Investors purchase growth stocks with the expectation that the company’s earnings and stock price will increase significantly over time. The primary appeal of growth stocks is their potential for substantial capital appreciation, as these companies often have the opportunity to disrupt industries and expand rapidly. However, growth stocks can also be more volatile and carry higher risk, as their stock prices can be sensitive to market conditions and investor sentiment.
Examples of growth stocks include companies like Amazon, Tesla, and Google, which have historically experienced rapid growth in revenue and stock price. These stocks typically don’t pay dividends, as the companies prefer to reinvest profits to fund future growth.
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