Investing in growth stocks is a great way to change your life while investing in the stock market. It is, of course, important to know which growth stocks to buy and when. Here’s an investment guide to getting you started.
These tools and strategies can help you position your portfolio in growth stocks for long-term success.
What are growth stocks?
Growth stocks are companies that grow profits faster than the average company in the industry or the market as a whole. But investing in growth isn’t just about picking stocks that go up.
In many cases, emerging companies develop innovative products and services that can be used in existing markets and enter new markets or create entirely new industries.
The market usually takes long-term averages in favor of shareholders. And the faster it grows, the higher the yield. Unlike value stocks, fast-growing stocks tend to be more expensive than average stocks in terms of performance, risk exposure, price, and other metrics. Free cash flow rate.
Despite the premium price charts, the fastest-growing stocks can bring good luck to investors if they take advantage of their impressive upside potential.
Best growth stocks 2021
Here are the top 10 growth stocks in 2021 for you to invest your money in:
- Shopify
- Alibaba
- Square
- Mercado Libre
- JD
- Netflix
- Salesforce
- Amazon
As you can see from this list, growth stocks come in all shapes and sizes. It can be found in various industries in the United States and international markets.
All the stocks on this list are large companies, but small businesses can also be fertile ground for growth investors. ), such as the Vanguard Small Cap Growth ETF, support the CRSP US Small Cap Growth Index, making it easier for investors to invest in approximately 580 small businesses at the same time with an expense ratio of 0.07%.
This means that investors receive almost all of their refunds, and Vanguard receives a very small commission. (An annual commission rate of 0.07% corresponds to a cost of $ 0.70 for each $ 1,000 invested per year).
How do you pick the right growth stock?
To find high-growth stocks, you need to: Use a list of companies with a strong competitive advantage by identifying strong long-term market trends and narrowing down the top positions.
Find what is trendy and which companies are behind the trend train
Companies that take advantage of sustainable long-term trends can increase sales and profits over the years and create shareholder wealth. The coronavirus pandemic has accelerated many trends that are already developing.
Here are some examples of companies that can help you capitalize on this trend.
Electronic commerce:
With the rise in online shopping, Amazon and Shopify are well-positioned to make money in the US market. Alibaba and JD.com are now dominating e-commerce in China. MercadoLibre also ranks # 1 in Latin America’s online trading market.
Digital Advertising:
Facebook and Alphabet own most of the digital advertising market and plan to generate significant revenue as their marketing budgets shift from TV and print channels to online channels.
Digital Payments:
Square is accelerating the global transition from cash to digital payments by allowing businesses of all sizes to accept debit and credit card transactions.
Cloud computing:
Amazon and Alibaba cloud infrastructure services may make this possible, but Salesforce.com has the best cloud computing software.
Streaming and Entertainment:
Millions of people are unsubscribing from cable TV and replacing them with cheaper, more convenient streaming options. Netflix, the global leader in streaming entertainment, offers a great way to capitalize on this trend.
Work from home:
During the COVID-19 pandemic, many organizations need to work from home. Research suggests that the trend towards telecommuting will continue long after the pandemic, as it offers cost-effectiveness and business benefits associated with flexible working styles. Zoom continues to capitalize on this trend with easy-to-use cloud-based phone and video collaboration tools.
It is important to invest in such trends and companies as soon as possible. The sooner you sign up, the more benefits you will receive. However, the strongest trends can last for years or even decades, leaving enough time to claim a portion of the income generated.
Look for companies that are different and more competitive
It is also important to invest in a growing company with a strong competitive advantage. Otherwise, competitors may miss it, and growth may not last long. Some of the competitive advantages include:
Network Effects:
Facebook is a great example. Each member of social networks makes them more valuable to other members. The network effect is preventing new entrants from changing the position of the current market leader, allowing more than 2.5 billion Facebook users to be replaced by new social media companies.
Size advantage:
Amazon is a great example of this. It is very difficult for smaller competitors to imitate large global order fulfillment networks.
High migration costs:
Migration costs are the costs and challenges associated with migrating to a competitor’s product or service. Shopify serves as an online commerce operating system for over a million companies and is a good example of a company with high switching costs. Once companies start using Shopify as the backbone of their online business, they are unlikely to switch to other competitors.
Find companies that have big potential markets
After all, we want to invest in companies with large and easily accessible markets with great growth potential. Industry reports from research firms such as Gartner and eMarketer can be very helpful in this regard as they include estimates of industry size, growth projections, and market share.
The more opportunities, the larger your business. And the faster its growth cycle, the longer it will take for it to grow impressively.
