What it is:
Growth stocks are fast-growing, higher-risk companies. They tend to be young. They bankruptcy.a higher chance of higher returns and a higher chance of
How it works/Example:
The nature of a company's business determines many of the characteristics of its dividend payments. Their values don't "jump around" as much as of smaller, riskier companies, generally speaking, and so conservative investors who like dividend payments and not much risk tend to like blue-chip stocks. Companies that pay out dividends are typically they are generally mature companies that feel the highest and best use of its excess is dividends rather than, say, research and development or other .
Growth stocks are generally riskier than other types of companies, but they also a chance at very high returns. These returns are often in the form of capital gains rather than dividends. Tech stocks are generally good examples -- they tend to reinvest all excess cash into their businesses and rely heavily on research and development of products that can be very lucrative but easily outdated.
Why it matters:
It's important to stocks, growth stocks or , for example. Small-cap stocks can be growth stocks, income stocks, or tech stocks. However, perhaps the most important attribute of growth stocks is that like all stocks, their holders are the last in line when it comes to getting their back. If the company goes bankrupt and has to sell off all its assets, the from the sale first goes to pay off lenders, employees and lawyers. The shareholders get whatever is left (which is usually nothing, or just a few pennies for every dollar they originally invested).
Deciding whether to buy growth stocks, or which growth stocks to buy, requires you to consider your goals in life, your age, your cash needs, future cash needs you might have (retirement, college, etc.), your tax situation, the nature of your other , and how much risk you're willing to take.