Long-Term Growth (LTG)

Long-term growth (LTG) is an investing strategy and concept in which a security appreciates in value for a relatively long period of time, whether or not this growth begins immediately or develops gradually. Long-term growth is a relative term as investors’ time horizons differ, based on their individual styles.

For example a buy-and-hold investor may view long-term growth with a multi-year horizon. In this scenario short-term price fluctuations are not of major concern as long as the securities’ fundamentals do not change. Many value investors focus on stocks with long-term growth potential, searching for companies that are relatively inexpensive and waiting until they increase in value as the market catches on to their fundamental strength, before selling.

Long-term growth stands in contrast to investing strategies based on short-term price movements. Day traders and other speculative investors will focus on the timing of their purchases and sales on a minute-to-minute basis in order to capture small points (bps) of appreciation. While day trading can occur in any marketplace, it is most common in the foreign-exchange (forex) market and stock market.

Although day trading can help provide liquidity in markets, it also comes with significant controversy. Some engage in this type of trading without sufficient knowledge and face enormous risks. Many professional money managers and financial advisors shy away from day trading. They argue that the reward does not justify the risk in most cases. Many internet scams have capitalized promised enormous returns in a short period of time.

Warren Buffet is a famous value investor who focuses on the long-term growth potential of his investments. Displaying a penchant for analyzing companies at an early age Buffet attended the Wharton School at the University of Pennsylvania. He then completed his college degree at the University of Nebraska in 1950 and, inspired by reading "The Intelligent Investor" by Benjamin Graham, Buffett enrolled in a graduate program at Columbia University, where he studied under Graham. Benjamin Graham is often called the “father” of value investing.

After graduating Buffett secured a job with Graham's New York company, Graham-Newman Corp., where he worked as a security analyst from 1954 to 1956. In this role he studied company financial statements, revenue, profit, and margin trends, interviewed company management, and more. (Analysts that focus on long-term growth employ many of these tactics and more today.)