Growth stocks are companies that have been proven to increase their revenue and earnings at a faster rate than the average business in their industry or market. This type of investing involves more than just picking up rising stars; it also requires research into these firms' financials, management style (including shareholder returns), competitive landscape, valuation metrics like price-to-earnings ratio ("PE") as well as other factors such sustainability - all with an emphasis on growth!
My number 1 factor to look for is 'Does it solve a real problem?'
This is important because if I can't confidently answer this, then either I don't understand the industry well enough, or the company isn't solving a real problem. Either way, I shouldn't be investing in it.
If you're old enough to trade stocks then there's a good chance you've come across a product or service that you looked at and thought 'Why didn't I think of that' or 'finally someone is solving this'.
Probably the easiest example that just about everyone can relate to is Amazon. Amazon first started by being a dedicated book store online. The problem they were solving was very simple, there was no retailer online or offline who offered all the major books in one convenient place. Amazon's approach to solving this problem was to sell the books via their eCommerce store, receive the orders and then ship the books from a single warehouse to their customers around the US.
It was a simple and elegant solution that solved a real everyday problem.
Always start here as an investor. If you can't answer the question, does it solve a real problem, then don't go any further. Pass on it and move on to another opportunity. Don't for a second think that this is the only opportunity you will ever get and you have to buy because your friends told you to. That's fools logic.
To make real lasting money in the stock market you are going to have to ride the ups and downs. If the stocks you own don't solve real problems or you don't understand the business, you will absolutely throw in the towel and sell when volatility hits or when the emotions are high for whatever reason.