See Stock Growth in Action

As an investor, stock growth is one of the most important things that you are looking for. Many investors specifically seek out stocks that are meant for growth. Stock growth is the main area in which investors make a return on their investment. Even though they can also receive dividends, capital appreciation is where most of the big money is made.

How Stock Grows

Stock growth is generated by the actions of the company. However, the growth is spurred by investor sentiment. If the investors in the market do not believe that a company has good potential, then the price is not going to continue to grow. The company should have good fundamentals in order to grow. A good company structure will enable a company to make good business decisions and grow a business. However, this may or may not impact the price of the stocks themselves. 

Long Term

In order to take advantage of stock growth, you will be required to commit to a long-term investment. Stock growth does not occur overnight. Most growth stocks require you to invest in them for at least three to five years before you make a profit. Long term growth is best for stocks.

Tax Advantages

As an investor, you will tax advantages when you invest in growth stocks. The government has set up a tax system that rewards those that stick with a company for the long-term. If you purchase stock and you sell it before 12 months have passed, you will be required to pay taxes on the amount that you made at your regular marginal tax rate. If you are in the highest tax bracket, this could represent a 35 percent tax payment. On the other hand, if you invest in the company longer than a year, you receive a tax break. In that case, you will have to pay the long-term capital gains tax rate at 15 percent. The tax savings can be significant.

Example

For example, let's assume that you are an investor and you find a growth stock that you want to invest in and you buy $10,000 into the stock, at $10 per share. This means that you own 1000 shares of the stock. Over the next five years, you stay with the stock. You watch it go from $10 per share all the way up to $100 per share. The company goes through massive amount of growth and success during that five-year run. When this happens, you are going to have stock that is worth $100,000. You essentially took your $10,000 investment and turned it into $100,000 just by selecting the right company and waiting it out. This example is simplified for understanding because most companies do not simply grow in the stock market, instead, there are ebbs and flows. Your stock may grow one year and lose its growth the following years.

It is also important to add that long term growth can also be affected by broker fees. Be sure to sign up with a company that has low maintenance fees. Brokerage fees can quickly eat up your profits, so be careful about what plan you choose for your investments.

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