Long-term growth is a term that is used to identify an approach to investing in which a given security is anticipated to increase in value over an extended period of time. With this type of growth, the security may or may not show signs of increasing in value within the first year or so, but has potential for appreciating over the next two to five years. Often, securities that exhibit the ability for long-term growth show incremental increases in value over time, rather than creating a sudden upturn in value.
With a growth investing strategy, an investor is likely to make use of a combination of investments that demonstrate the potential for both short-term and long-term growth. The securities that are anticipated to earn returns within a calendar year or less allow the investor to recoup the investment early on, as well as generate a return that can be used to build the portfolio or manage any other financial project that the investor has in mind. In the interim, investments that exhibit long-term growth potential help to create the foundation for the portfolio, providing stability and generating a consistent return over a number of years.
Many investors favor securities with long-term growth potential when it comes to creating nest eggs for retirement. In order for the strategy to work, the investor must be able to do without the resources used to purchase those securities. By continuing to hold them for several years, the investor can take the dividends as they are earned and use them to either secure additional shares of the securities, or divert those dividends into some other type of investment plan. This approach makes it possible to continually create additional financial resources that the investor can be call upon later in life, without causing any financial hardship in the here and now.
Since a long-term growth strategy is concerned with how well an investment will perform over the course of many years, the investor is relatively unconcerned with any fluctuations in the value of those securities in the short-term. Should a given security experience a downturn that is anticipated to last for several months, the investor may choose to hold onto the investment during those months rather than sell it. This is particularly true if reliable factors indicate that the security will regain lost ground and increase to a new high once the downturn is reversed. If the investor has reason to believe that the security will not regain a sufficient amount of profitability within the foreseeable future, he or she may opt to sell the investment and replace it with something that is expected to appreciate over the long-term.
