Growth Stock
Definition
A company with earnings growing faster than the overall market, with reinvestment of profits rather than dividend payments. Think Tesla, Amazon, Netflix. Higher volatility but higher potential returns. Opposite of value stocks.
Why It Matters
Growth stocks power long-term wealth building. While they're riskier and more volatile than value stocks, decades of 10%+ annual returns outpace dividend-paying stocks. Most early-career investors should overweight growth.
Example
Growth stock (Tesla): Fluctuates wildly, no dividend, returns 20%+ annually when markets are good, -30% when bad. Value stock (Coca-Cola): Steady 8% returns with 2% dividend, less exciting but reliable. Over 30 years, Tesla massively outperforms if you can handle volatility.