ICLUBcentral - Doug Gerlach's ICLUB Therapist: Growth Stocks -- Searching for the Sprinters

Growth Stocks: Searching for the Sprinters

Investors who focus on growth try to predict which companies will grow faster in the future -- faster than the rest of the stocks in the market, or faster than other stocks in the same industry. If you're successful in buying a company that does grow faster than other companies, then it's likely that the price of that company's stock will increase as well, and you can make a profit.

The stock of a company that grows its earnings and revenues faster than average is known as a growth stock. These companies usually pay few or no dividends, since they prefer to reinvest their profits in their business.

Peter Lynch primarily used a growth stock approach in managing the Magellan mutual fund. Individuals who invest in growth stocks often prefer it because their portfolio will be made up of established, well-managed companies that can be held onto for many years. Companies like Coca-Cola, IBM, and Microsoft have demonstrated great growth over the years, and are the cornerstones of many portfolios. Most investment clubs stick to growth stocks as well.

Doug Gerlach is ICLUBcentral's Investment Club Therapist, helping clubs and their members to operate more efficiently and more harmoniously. Doug's latest book, Investment Clubs for Dummies is the ultimate guide to starting and running a club, packed with tips and insight about club operations, education and investing. He is the author of several other popular investing books, including The Complete Idiot's Guide to Online Investing and The Armchair Millionaire. Doug has been a member of the NAIC Computer Advisory Group's Board of Directors since 1995. For more of Doug's advice on online investing, visit DouglasGerlach.com.

Got a question about investment clubs? Ask Doug!

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