Canadian looking for long-term growth should embrace the tech sector. However, they should also be careful not to chase the overheated and overvalued plays that may very well be overdue for a sudden correction or crash going into 2025. Of course, the stakes tend to be quite a bit higher in growth investing.
While paying up a higher multiple may be justified if the growth narrative and underlying fundamentals are sound (or better yet, improving), I still think it’s a bad idea to leave your valuation tools behind as you take a deep dive into the world of investing in growth stocks. Indeed, some of the same rules that apply to old-fashioned value stocks still apply in the hyper-growth scene. It’s just harder to value such stocks if you can’t get a good gauge of the technology at hand and the market opportunity over the medium term (think the next two to three years) as well as the longer term (a decade and beyond).
Does that mean you shouldn’t have as much growth stock exposure if you’re a beginning investor? If technology is something you understand and you’re young enough to stomach the high risks (and elevated volatility in the growth stock scene), I think it makes sense to own the growth names, perhaps with a bit of an overweight position if you’re sure a name is undervalued relative to its growth profile. to see which name is the better fit as their momentum looks to carry over into a new year. Apple Apple isn’t necessarily a growth stock, but its current va.
