Growth Stock refers to shares of a company that are expected to grow at a rate significantly higher than the average growth of the overall market. These companies typically reinvest most of their earnings into business expansion, research and development, or new product lines instead of paying high dividends. As a result, investors buy growth stocks primarily for capital appreciation rather than regular income.

Companies categorized as Growth Stocks often operate in rapidly expanding industries such as technology, healthcare, or consumer innovation. They tend to show strong revenue and profit growth, even if current earnings are modest compared to mature companies. Investors are attracted to these stocks because of their potential to deliver substantial long-term returns if the company continues to perform well.

However, growth stocks usually trade at higher valuations, reflected in metrics such as the Price-to-Earnings (P/E) ratio or Price-to-Book (P/B) ratio. This premium pricing is based on future earnings expectations. While the potential for high returns is appealing, growth stocks also carry higher volatility and risk, especially during economic slowdowns or market corrections when investor sentiment shifts toward safer assets.

Unlike value stocks, which are typically undervalued and offer steady dividends, Growth Stocks are suited for investors with a higher risk appetite and a long-term investment horizon. They are ideal for those seeking wealth accumulation through price appreciation rather than immediate income.

In essence, Growth Stocks represent companies that are innovators and market leaders in their sectors, capable of delivering above-average growth. While they can significantly enhance a portfolioís returns, investors should balance them with stable investments to manage risk effectively.