Advantages of Active Growth Stock Investing

1. Potential for Higher Returns

With an active approach to investing, investors can potentially generate higher returns than what might be achieved through passive growth investing. This is because active investors are able to capitalize on short-term price movements and company fundamentals.

2. Flexibility

Active Growth investors have more flexibility in terms of when and how they trade, allowing them to capitalize on shorter-term trends and opportunities as they arise. This is because they can free up capital quickly in order to take advantage of these opportunities.

3. Diversification

By actively trading, investors are better able to diversify their portfolios across different stocks and industries, reducing the risk associated with any one investment. This is especially relevant given that industries shift in favour over time, resulting in the potential for different investments to perform differently. 

4. Hedge Against Market Volatility

Active growth stock investing allows investors to better manage their risk exposure and hedge against market volatility. By actively monitoring the markets, active growth investors can be quick to react to sudden changes or corrections in the markets.

Disadvantages of Active Growth Stock Investing

1. Time Intensive

Active Growth investing requires more time and effort on the part of the investor compared to passive investing, as decisions must be made more quickly and often on a daily basis. Once you set up your systems, however, it only takes up about 20-30 minutes a day.

2. Higher Transaction / Brokerage Costs

Active Growth investors are often subject to higher transaction costs due to the more frequent trading activity required for this type of investing.

3. You Need More Capital To Initiate This Strategy

The minimum suggested financial requirement to best make use of this strategy is at least $10,000 in capital ready to invest. This is because as active growth investors, you are exposed to more risk in the short to medium-term, and as such, risk management strategies such as position sizing and diversification are much more important.

4. Emotional Involvement

Active Growth Stock Investing also requires more emotional involvement from the investor, as decisions must be made quickly and often on a daily basis. This can lead to emotional fluctuations which could negatively affect decision-making, especially as you will also be observing stock price fluctuations on a more frequent basis.

What Active Growth Investors Need to Know

Active growth investors need to make sure that they stay disciplined, and not get caught up in short-term thinking or trends.

It is important to remember that the stock market can be unpredictable and one should always take a long-term view when making decisions (i.e. making sure the stocks you pick are financially sound).

Additionally, having solid risk management strategies in place is essential for success, as well as having access to reliable financial news sources.

Tips for Becoming A Successful Active Growth Investor

1. Develop an understanding of the markets: Take the time to understand the stock market and learn how different stocks are affected by different economic factors. A great way to do this is through our FREE LIVE Online Masterclass.

2. Research potential investments: Research potential investments thoroughly before entering or exiting any position. Make sure each stock you buy is financially sound with these 10 Must-Have Stock Criteria.

3. Keep your emotions in check: Don’t let your emotions get in the way of making sound investment decisions. A great way I do this is by going for a bike ride every morning before I check my stocks.

4. Have a plan and stick to it: Have a plan in place and make sure that you follow it. This will help to keep your emotions in check and ensure consistent results.

5. Manage your risk: Make sure to manage your risk appropriately using strategies such as position sizing and diversification. This will ensure that you remain in the game for the long-term.