Growth Investing as a Teen

27
Bumper logo

Bumper Bites

Up Arrow, Chart, & Gear

As a teen investing in the stock market, our strategy of investing can be different from our grandparents and even our parents. We have more time and compounding potential waiting for us. Unlike our grandparents, we can take more risks. If you are looking for a little more risk with the possibility for above-average returns, then growth investing might be a fitting strategy. 


Growth investing is an investing strategy that focuses on capital appreciation and finding younger companies that are expected to have above-average earnings in the future. This style of investing is like gardening. You find some seeds to plant. You invest time and money into them in hopes they will grow to stand above the other plants in your beautiful garden. 


Starting your own garden does come with risks, especially if you are fostering younger plants. There are a variety of things that can go wrong. The same goes for growth investing. Since these companies do not have a historical track record, their earnings are relatively uncertain and are not guaranteed to perform.


Stocks that may fit into the growth investing strategy are small-cap stocks or sometimes tech companies since they are often priced higher than their earnings value. Small-cap would indicate to an investor that the company is still relatively small but may have the potential to produce superior returns in the future. 


Now, to begin planting seeds to invest in, investors evaluate several factors to determine if a plant has the potential to grow above the rest.


  • Historical & Future Earnings Growth is a way to determine if a plant might be one pace to rise above the rest. In stocks, we can use five to ten years of earnings per share data to evaluate the stock’s past performance. Then to gauge future growth, we can be on the lookout for earnings announcements and earnings estimates created by analysts!
  • Profit Margin is like gauging if an apple tree is yielding quality apples. If it only produces bad apples, the tree isn’t useful. A stock that has grown sales but incurred too many expenses each year, may not have desirable growth either. 
  • Return on Equity (ROE) is a way to find out if the effort and time you are putting into the garden is being returned. If a company’s ROE is low in comparison to the past year, that would indicate that the stockholder's investment is less profitable than in the past.
  • Stock Performance is the last important component of identifying a growth stock. A common rule of thumb is that if a company’s stock price can’t double in five years, it may not be considered a growth stock. Although we can’t predict a stock’s future performance, we can use these factors to uncover potential growth stocks to invest in!


And that’s how you begin building a garden using growth investing. Now that we are building some momentum, let’s dive into momentum investing.

Source: Investopedia | Growth Investing

Previous Div

Next Div

Disclosure: This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Alpaca is not registered (Alpaca is registered only in the United States). All investments are subject to investment risks, including possible loss of the principal amount invested.
Disclosure: Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security's eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on principal or riskless principal basis, and can only be bought or sold with market orders during market orders.
Equip Solutions, Inc. ("Bumper") and Alpaca Securities LLC ("Alpaca") are not affiliated and neither are responsible for the liabilities of the other.

Technology is offered by Equip Solutions, Inc.

Brokerage services are provided by Alpaca Securities LLC ("Alpaca”), member FINRA, a wholly-owned subsidiary of AlpacaDB, Inc. Clearing services are provided by Velox Clearing LLC (Velox) and Vision Financial Markets LLC (Vision). All three are members of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash) per customer. Explanatory brochure available upon request or at www.sipc.org.

This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Alpaca is not registered (Alpaca is registered only in the United States).

View Alpaca's disclosures at: https://alpaca.markets/disclosures

Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security’s eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on a principal or riskless principal basis, and can only be bought or sold with market orders during normal market hours.

The content on this website is for illustrative and informational purposes only and any historical returns, expected returns or projections are hypothetical in nature. Investing involves risk & investments may lose value, including the loss of principal. Past performance does not guarantee future returns or results. Before investing, carefully consider your investment objectives, time horizon, and overall risk tolerance as well as the information stated in the product offering prospectuses.