Topic: Growth Stocks

How you can spot the best investments for long-term growth

The best investments for long-term growth typically include hidden assets, a strong hold on a market, and more

We continue to think Successful Investors will profit most—and with the least risk—by buying shares of well-established companies with strong business prospects and strong positions in healthy industries. That generally serves to highlight lower-risk investments.

Some of the best investments for long-term growth involve well-established, safety-conscious stocks selected in line with our Successful Investor philosophy. They have the asset size and the financial clout—including sound balance sheets and strong cash flow—to weather market downturns or changing industry conditions.


For a rising portfolio

Learn everything you need to know in 'How to Find the Best Growth Stocks' for FREE from The Successful Investor.

Canadian Growth Stocks: CGI Group, CAE Inc., Fortis Inc. Stock and more.





Combine the magic of compounding combined with the best investments for long-term growth so you can exponentially increase your profits

Compound interest—earning interest on interest—can have an enormous ballooning effect on the value of a fixed-income investment over the long-term.

Compound interest can be considered the mother of all long-term investment strategies.

This tip is especially important for young investors to learn—and this tip’s benefits apply as well to stocks and dividends, and not just fixed-return, interest-paying investments, like bonds. When you earn a return on past returns, the value of your investment can multiply. Instead of rising at a steady rate, the number of dollars in your portfolio will grow at an accelerating rate.

To maximize your profit from compounding, you need to pay attention to steady drains on your capital, even seemingly small ones—like high brokerage commissions, say. If you’re losing (or missing out on a profit of) even 1% a year, it can have an enormous draining effect on your investments over a decade or two.

Invest in growth stocks so you can add the best investments for long-term growth to your portfolio

Although growth stock picks can be volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.

For most investors in growth stocks, you should limit your aggressive growth investment holdings to a smaller part of your overall portfolio. But growth stocks overall can contribute to higher returns, especially if you always focus on investment quality first.

Here are some tips for selecting the best growth stocks as long-term investments:

  • Always review the balance sheets of the growth stocks you want to invest in.
  • While you are looking at balance sheets, look for hidden assets like real estate. At times, the hidden assets in a company’s real estate can even come to exceed the market value of its stock.
  • When investing in more speculative growth stocks, use our “sell-half” rule. This says that if a stock you own has doubled, you should sell half so you get back your initial stake. If you are too slow to sell speculative stocks in your growth portfolio, your profits, and even your principal, can evaporate all too quickly.
  • Try to find growth stocks that have ownership of strong brand names and an impeccable reputation. Customers keep coming back to these businesses, and will try their new products.

Uncover hidden assets so you can take advantage of some of the best investments for long-term growth

Hidden assets are valuable assets that some investors overlook, discount or disregard altogether. They have special appeal for companies that are using takeovers of other firms to grow. They can be found in real estate and in research and elsewhere.

A hidden asset can come out of existing brand names that can help launch new products. They can also grow out of government obstacles to the entry of new competitors into a market.

If you buy a stock for its hidden assets, those assets stay hidden or ignored by investors— or turn out to be less valuable than you thought—but it can’t hurt you much. By definition, a stock’s hidden assets have not had much impact on its price so far. If you paid little if anything for the assets, you have little to lose. But the best hidden assets will eventually expand a company’s profits, grab investor attention, and push up its stock price.

Hidden assets should always be looked for while evaluating a stock. Stocks with them are not rare, but they’re hard to find. And once you find a stock with hidden assets, use these three financial measures to help evaluate the shares: price-earnings ratios, price-to-book-value ratios, and price-cash flow ratios.

Investors who look for investment quality, diversification and balance can find the best investments for long-term growth

You’ll find that many of your worries concern things that are unlikely to happen; that are already largely discounted in current stock prices; and that probably won’t matter as much as you feared they would. That also applies when you’re looking for the best high-risk stocks to invest in.

You get a much better return on time spent if you devote less of it to worrying about high-risk stocks to invest in, and more of it to an investing strategy. Create a strategy that is built upon analyzing the quality and diversification of your investments, and the structure and balance of your portfolio.

Use our three-part Successful Investor approach so you can profit over the long term

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

What’s been your approach to growth stocks? How successful has it been for you?

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