What are Growth Stocks?
Growth stocks are issued by companies demonstrating a high potential for development. Growth stocks increase your value of money, by multiplying and compounding. Growth stocks are typical stocks known for growth and not for dividends. These companies invest all their earnings back into the company to grow the company even better, but this is not a low, and growth stocks may also provide dividends. Such companies can create massive wealth through capital appreciation.
In the world of investing, growth stocks have garnered significant attention and admiration due to their potential for delivering substantial returns. These stocks belong to companies that are expected to expand at an above-average rate compared to their industry peers and the overall market.
Features.
Purchasing a growth stock is ideal for risk-prone individuals looking to gain massive returns on their total investment amount. Investors can easily identify the best growth stocks and their issuing companies by considering the following features Price-to-earnings ratio: A company having a high potential to develop generally has a higher P/E ratio. Price/EPS gives us the P/E Ratio, which means the price is generally high for these stocks. So it sometimes shows price is overvalued.
PEG Ratio : Many times it needed to see PEG Ratio of these stocks, which simply shows stock's P/E Ratio w.r.t. it's growth. Best is <1 and if not means if >1 then closer to 1 is good.
ROE and ROCE : Check how much company's ROE,which shows how much company earns from it's equity. Same wise how much it earns from the capital employed by the company. It is presumed that ROCE should be more than 15% because generally cost of capital is 15%.
Why Should You Invest in Growth Stocks?
Higher Return
Investment in best growth stocks is undertaken to ensure wealth accumulation through large scale capital gains. Such companies exhibit a higher expansion rate than the underlying industry it is operating in, thereby ensuring larger revenue generated.
Profits through investment in growth stocks can only be realized in the long term. Any capital gains earned in this tenure is subjected to long term capital gains tax (LTCG), which is relatively lower than short term taxation policy. Also, a provision for indexation is present, reducing the tax burden of individuals even further.
Investment in best growth stocks is undertaken to ensure wealth accumulation through large scale capital gains. Such companies exhibit a higher expansion rate than the underlying industry it is operating in, thereby ensuring larger revenue generated.
Profits through investment in growth stocks can only be realized in the long term. Any capital gains earned in this tenure is subjected to long term capital gains tax (LTCG), which is relatively lower than short term taxation policy. Also, a provision for indexation is present, reducing the tax burden of individuals even further.
Hedge against inflation
One can earn a return from growth stock, which is much higher than the inflation rate. If one invests in mid or small-cap stocks, he can earn much higher than the inflation rate.
Risks Associated with Growth Stocks
Growth stocks are characterised as a risky investment venture. This is because these companies aim to generate profits by gaining significant market advantage, through aggressive business strategies. Such companies tend to forgo on dividend payments for reinvestment for expansion purposes, which is a major disadvantage to investors.
In case a business churns out losses, in the long run, investors stand to lose out on total investment undertaken, as no dividend payments are realized during the lock-in period.
One can earn a return from growth stock, which is much higher than the inflation rate. If one invests in mid or small-cap stocks, he can earn much higher than the inflation rate.
Risks Associated with Growth Stocks
Growth stocks are characterised as a risky investment venture. This is because these companies aim to generate profits by gaining significant market advantage, through aggressive business strategies. Such companies tend to forgo on dividend payments for reinvestment for expansion purposes, which is a major disadvantage to investors.
In case a business churns out losses, in the long run, investors stand to lose out on total investment undertaken, as no dividend payments are realized during the lock-in period.
TOP GROWTH STOCKS IN INDIA
1.KEI Industries
It is a leading Electrical Wires and cables Manufacturer Supplier in India.
.2.Bajaj Finance
It is a leading NBFC in India
It is a leading NBFC in India
3. Varun Beverages
Varun Beverages Ltd is the one of the largest franchisee in the world (outside US) of carbonated soft drinks,
4. Axis Bank
One of the largest private bank in India.
5. Titan
India's largest jewelry and luxury brand.
6. Tata Power.
TOP GROWTH STOCKS IN US
1. Amazon : online retailer and web service provider. The company provides products such as apparel, auto and industrial items, beauty and health products, and electronics.2.Nvidia : Semiconductor co and a leading high-end GPU manufacturer.
3. Salesforce: Salesforce helps businesses keep track of customer interactions and sales data. It can manage leads, contacts, opportunities, and cases.
4.Fiverr: Freelance, e-book, etc.
5. Etsy: For unique goods for independent sellers of all over the world.
