Growth investing

However, some notable investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth ("Growth and Value Investing are joined at the hip"), as growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive. Buffett has recognized the influence of his business partner Charlie Munger on this view, which is best expressed by the famous Buffett saying "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price".

Thomas Rowe Price, Jr. has been called "the father of growth investing" because of his work defining and promoting growth investing through his company T. Rowe Price, which he founded in 1937 and is now a publicly traded multinational investment firm.

Also influential in shaping this investment style was Phil Fisher, whose 1958 book "Common Stocks and Uncommon Profits" is still today a reference for identifying growth companies.

Distinguishing growth from value investing

In contrast to value investing, growth investing is when the investor chooses a company that has yet to reach its full potential to invest in. This type of investing requires the investor to do a lot of research to find companies that have the potential to grow rapidly and compete with other, often larger companies within its given field. Instead of investing in an already established company, the investor takes a higher risk in hopes that the company grows and makes them money.

Growth companies are companies that have the potential to grow at a rate that is higher than the market average. Larger companies typically pay dividends to their stockholders, but growth companies will often reinvest their earnings in effort to grow the company. These companies are becoming more popular to invest in because they show great potential. This potential typically roots from the company offering a unique or advanced product that is ahead of their competitor’s products.