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One, Two, Three (Thomas Polen/Getty Images/iStockphoto)
One, Two, Three (Thomas Polen/Getty Images/iStockphoto)

Investing Basics

How to invest for growth Add to ...

Growth investments have the potential to increase in value. You can make money by buying at one price and selling at a higher price in the future. But these investments can also lose value, which makes them risky. Growth investments include equity mutual funds, ETFs and stocks.

When you’re investing for growth, you might want to consider 1 of the following approaches to choosing investments.

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1. Value investing

This involves picking high-quality companies that seem to be undervalued because they cost less than similar companies in the same industry.

Learn more about value investing with these 3 videos:

2. Growth investing

This involves picking companies that keep all their earnings to invest in growing their business. The stock may be expensive today, but growth investors believe that the company’s future growth will help the stock continue to go up in price.

3. Index investing

This means investing in a group of stocks that behave like a particular market index. You can make your own picks, or simply buy units of an index mutual fund or index ETF.

4. Top-down investing

With this approach, investors first look at the overall economy to find out where there are strengths and opportunities. Then they pick the industries or sectors that will most likely perform well, choosing stocks with the greatest growth potential within those industries or sectors.

5. Bottom-up investing

This involves using

financial ratios and other indicators

to pick stocks based on a company’s basic strengths, including its management team. Bottom-up investors believe a stock can perform well even in if its industry or the economy is not doing well.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

 

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