This in an excerpt from this book
Due to the rapid changes encountered in the social, economical, and technological status in the society, the financial market is becoming more volatile causing a great impact on the capital investment made by the investor. In today’s market scenario, investors need to make a wise-decision on the type of financial investment the investor is intending to make. Fundamentally, there are two main types of investments that are available in the market and they are: a slow and steady income generating type of investment known as the defensive investment, and a high-profit generating with a high-risk oriented type of investment known as the growth investments.
Generally, the investors are advised to consider a diverse portfolio of investments to gain maximum profit with lower risks catered to various economic conditions prevailing in the market. The diverse portfolio of an investor can include a combination of investments ranging from a stable, income generating defensive investments (cash and fixed deposit) to a highly volatile and high profit generating growth investment plans.
While there are many pioneers who have contributed in the growth investment plan, the earnings cannot be guaranteed based on a single thumb of rule or by adopting any specific strategies. Some of the greatest investors who have contributed in the field of finance investments are Thomas Rowe Price, Jr, Philip Fisher, Peter Lynch, John Templeton and William J.O’ Neil. These investors have adapted various types of investment styles including the successful long-term growth investment style. However, none of these investors have completely adapted the growth investment style exclusively.
Thomas Rowe Price, Jr, known as the father of growth investment, started his own fund investment association (T. Rowe Price Associates) in the year 1937. The investment style of this association is to market funds on well-managed and high-profit oriented companies.
Philip Fisher, a famous growth investor and founder of an investment management firm known as Fisher investments, in the year 1931. Fisher mostly invested in the manufacturing companies and emphasized on focusing on a limited number of stocks that has the potential to outperform in sales and profits sector for a long term. He preferred to reinvest the earnings for the development of the company and emphasized to monitor the following key factors before investing in any company: tracking management quality, facilitating competitive edge, and recording consistent sales growth.
William J. O’Neil, stands out for his own investment strategy that considers both the quantitative and qualitative approaches for determining the potential of high value stocks. Further, in his style of investment, he emphasizes on holding onto stocks that are of high value and selling out the stocks that are undervalued.
While each of the great investors has implemented different investment styles to meet their financial objectives, there is no single thumb rule or strategy that promises high-profit returns in the growth investment plan.
Hence, the growth investment must be well-planned by the investor through the mechanism of researching (about the companies and/or the underlying properties) before extending the capital investment, and identifying the key performing fundamentals of the company to leverage high-profits.
Historically, the share stocks are considered to be one of the viable instruments for an investor to gain higher-profits for a longer time-period. While the share stocks provide ownership for the investors along with the voting rights in the company’s profile, it is one of the risky trading activities available in the market. Hence, the growth investment plan requires a thorough understanding of basic fundamentals in order to meet the financial goals and objectives.
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