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What Is a Growth Strategy?

In business, growth strategy is used to expand a company.
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  • Written By: Alexis W.
  • Edited By: Heather Bailey
  • Last Modified Date: 11 September 2014
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A growth strategy can have different meanings depending on whether the term is used in business or investing. When used in business, it generally means a plan for how the company is going to grow and into which market. More commonly, however, the term is used in investments. It is used to specify a method of selecting and investing in stocks that are projected to grow at a higher rate, as compared to other stocks.

There are many options of stocks to invest in on the stock market. Blue chips, for example, are large and established companies in which there is not generally a great deal of fluctuation in the price. Mid-caps may be midsized businesses that have some potential for growth, generally more than the blue chips, but also slightly more risk than blue chip stocks. Emerging markets — investments in countries that are likely to begin to grow and develop — and growth stocks — investments in small businesses that may take off and reap major rewards — are generally considered the riskiest investments but the investments with the most potential to grow money.

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When an investor chooses how to invest, he must determine whether to use a growth strategy or to use another strategy. He may, for example, want to engage in dividend investing instead, which is a strategy in which the investor buys stocks that pay a dividend to produce income. On the other hand, those investors who use a growth strategy aren't focused on generating income in the form of dividends, nor are they necessarily focused on safe returns that might come from a mutual fund. Instead, they want to achieve the largest possible return on their investment, or they want to help their money grow as fast as possible.

An investor who is interested in using a growth strategy can research and select individual stocks on his own that are likely to grow more quickly and/or outperform other stocks as a whole. This requires a great deal of research and knowledge. He can also consider investing in a growth stock mutual fund, which means that his money is added to the money of many others and a professional manager invests all that money in a series of growth stocks, allowing the investor to have a growth strategy without having to pick each individual stock.

There is tremendous potential to make money with a growth strategy form of investing. There is, however, also a risk that the stocks will not grow or perform and that money will be lost. The strategy is thus best employed by those who are younger and more able to wait until a market recovers or able to replenish lost money before it is needed for retirement or to accomplish other goals.

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