Moderation Vs Growth – An Historical Debate Continues Today

by David Jenyns on April 17, 2009

The market is always in the habit of overbuying stocks of favored groups or overselling shares of “deflated” industries and this is something you don’t want to get caught up in.

It pays not to overreach for or chase after any stock. There is nothing permanent in the growth of any industry group. Just as yesterday’s glamour stocks have become today’s wallflowers, so today’s favorites could be tomorrow’s laggards. Market leaders keep changing hands, with the “Street” turning to one group after another in a pendulum fashion. Style or vogue in investment can change rapidly.

As a corollary to its outstanding profit potential, growth stock investment entails above-average risk. There is no such thing as an absolutely bad stock or an absolutely good stock. At a certain price level, even a normally unattractive stock could become attractive. Or vice versa, a normally attractive stock would become unattractive if excessively priced.

Paying attention to price and being engaged in your company research should save you from overreaching. Investing is a long-term consideration, so take the time you need to choose carefully.

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