What is the difference between growth and value investing?

Growth investing is characterized by the strategy of targeting companies that are expected to grow at an above-average rate compared to other companies in the market. This approach focuses on identifying stocks of businesses that exhibit strong potential for future expansion, often signified by factors such as increasing revenues and profits, even if their current valuation seems high compared to their present earnings.

Investors who engage in growth investing are typically willing to pay a premium for shares of companies that they believe will outperform the market due to innovative products, market dominance, or strong competitive advantages. This contrasts with value investing, which seeks undervalued companies that are perceived to be trading for less than their intrinsic value.

Thus, the correct answer accurately reflects the essence of growth investing by emphasizing the pursuit of stocks in companies that are expected to show above-average growth, distinguishing it from other investment strategies focused on different aspects like risk levels or valuation metrics.