Growth stocks

Growth Stocks

These are stocks in companies that are considered to be “growing”. These companies may be delivering new products and services, or entering new markets.

Investors view these companies as having a lot of potential to grow fast, so are willing to pay a higher price for their shares today because they expect big things tomorrow. Basically, investors expect their share price to grow significantly.

Growth stocks tend to have a high price-to-earnings (P/E) ratio, and are unlikely to pay dividends because they are reinvesting their profits to drive growth. There is potential for big returns but also higher risk of losses.

Tech companies, such those operating in the artificial intelligence (AI) or electric vehicle (EV) space, are viewed by some investors as “growth stocks”.

Growth stocks differ to value stocks.

More terms

Professional Client

An investor that is able to meet several regulatory criteria.

Profit and Loss Statement (P&L)

A statement that summarises firm's expenses, costs, and revenues incurred during a time period. AKA income statement.

Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.

American Depository Receipt (ADRs)

Tradeable assets that let Americans invest in overseas stocks using US laws and dollars.

DMO

The United Kingdom Debt Management Office. It’s an executive agency responsible for managing the government’s debt and cash needs, primarily through issuing gilts and Treasury bills.

Bed & ISA

Understand what Bed and ISA is and how it works

Custodian bank

Learn what a custodian bank is.

Total Return

This is the measurement of a fund’s performance in a specific period.

Depository

We look at what is a depository and what role they play in keeping markets work.

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