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A stock is said to be growth stock when it appreciates more than the market average. In most cases companies that reinvest major share of its earnings have stocks that rise above the overall industry trend of appreciation in the market. Therefore, the growth stocks hardly pay any dividends to the investors but bring high returns for them. Remember that not all the growth companies’ stocks are not growth stocks. In reality the stocks of the growth companies are in most cases overvalued in the market rather than being growth stocks.

Technically speaking, a stock can be termed as growth stock when it has the return on equity or ROE of 15% or above. ROE is a measurement that is used by the experts to determine the growth stocks. It is calculated by dividing the net income of the company with the number of equity it has. Growth stocks have high ROE and give high returns to its investors compared to the other stocks in that particular sector and in comparison to the overall average in which the stock market appreciates at that particular time.

Growth stocks are excellent investment if as an investor you want to see your investment rise at a faster rate than the market average. But while investing in growth stocks you must be prepared for a long term investment to get the maximum benefit of the investment. While buying the growth stocks and holding the stocks for significant period of time you must always remember that growth stocks will not pay you dividends even if the companies post a good profit at the end of the year.

So, if you are looking forward to have a good profit from the stock market investment, growth stocks are really a viable investment opportunity for you. But as with any other stock market investment, while investing in the growth stock you must always remember that the basic for gaining form stock market investment remains the same for the growth stocks as well. That is, you have to pick the right stocks for gaining from your investment.

 

 

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