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Lesson 11. How to Pick Stocks > Determining Your Objectives - Pg. 61

How to Pick Stocks 61 education savings, retirement plans, and the like. Growth attempts to make money over a long course of time by reinvesting most or all of the profits and proceeds back into the company to make it more valuable, thereby increasing the value of the stock. Dividends and income are not the major focus. In the case of conservative growth, particular attention is paid to preserving the capital or, in other words, to making sure your investments aren't going to lose the original amount you invested. Con- servative growth promotes companies whose value will rise over time while remaining particularly stable. Intel, for example, is a stable company whose existence is almost assured in today's com- puterized lifestyle. As the world's computer needs increase, the value of Intel should rise, with little concern that the company will ever go out of business or suffer such heavy losses that the value of the stock would fall below your original investment amount. By the way, this is not a plug for Intel ... no one ever thought Pan Am would go out of business either. Aggressive growth should be obvious, and except for the unspoken pitfalls it is. Aggressive growth is growth that is, well, more aggressive than conservative. Obviously, growth-oriented in- vestors want their stocks to increase in value, and the more the better, so why would anyone not choose aggressive? It is a generally accepted rule in investing that the higher the return, the higher the risk. We will discuss risk in greater detail later in this lesson, but think of it in sky-diving terms. The higher up you go before jumping, the greater the thrill. But, the higher up you go, the greater your chances of a mishap on the way down. Aggressive growth works on that same principle. Ag- gressive growth stocks are therefore usually those that produce faster growth, at the expense of the security of your principal. You might make more, but you run a higher risk of losing it all. Conservative growth stocks focus on increasing capital gains of the stock but not at the expense of losing capital. Aggressive growth stocks focus on increasing capital gains of the stock and are willing to accept higher principal risk to achieve this growth. Plain English