Investing in stocks is quite critical. Stocks belong to different types depending on the returns that they yield. No matter who sells and who buys and irrespective of what they aim at, shares in most cases are classified based on the returns that the investor gets. So stocks are mostly classified as growth stocks, value stocks and income stocks. A growth stock is the odd one out here. While income and value stocks are about the type of dividend that you get, the concept of dividend is absent in growth stocks.
In case if you never knew about growth stock earlier, this concept is going to be a little weird for you, at least the first time. People have different opinions with regard to growth stocks. So here we are trying to figure out a bit about growth stocks, and we will see as to how they affect your returns and investment decisions.
What are growth stocks?
- A particular variety of stocks are classified as growth stocks, and here the share investment procedures do not change. However, when it comes to dividend, the investors do not get to receive the dividend. The dividend shares of the investors are reinvested into the company with the aim of expanding the capital base of the company.
- With the expansion, the company will be able to shift its position assertively, or in simple terms, it will move forward and make better profits. The value of the company’s stock increases along with the growth of the company. The investor doesn’t expect dividend amount, and all he prays for is the growth of the company.
- Growth stocks are a little ahead of time. We still have a lot of people who find it hard to understand the concept of bull, bear and stocks. Growth stocks are also location-specific, and it will for sure take time to go global.
Growth stocks are risky:
In most cases when a person invests in the shares of the company, it becomes the moral obligation of the company to pay dividend to its investors and that is the return that an investor earns for his investment. But in the case of growth shares, the investor is sure to gain but not in terms of dividend. So if this is the case, unless you are sure that the company would at no cost fall sick and will reap the required returns, the investor is taking a huge risk. If your returns that are reinvested make profit, you are lucky. If something otherwise happens, the company will simply leave without paying. So in case of growth stocks the investor, for sure, is taking a huge risk.
Tech-companies and growth stocks:
Keeping aside the risk that encompasses growth stocks, the chances of return are always favourable if you choose to invest in a technology company. One need not have to say about the scope that technology has in the market. Every single day we see technology grow and no matter how much returns you reinvest, you will never fail to see profits. That is the reason as to why the concept of growth stocks works with technology companies, and investors are quite safe here.