- By Stocktry Expert
- 20th Jul 2020
Growth shares are gaining its significance as investors are interested in value creation
When you make an investment decision you have to make a choice between two alternative strategies about the dividend. The two alternative strategies are whether you want more current dividend and less future value of share or you want to increase the value of your share while sacrificing your current dividend payment.
For long term investment, generally value creating investment are preferred, that’s why we see that most of the mutual funds are of growth category. The rationale behind this strategy is that company retains the dividend for financing in the next period at low cost. This increases the value of the shares of that company and if you are a shareholder of that company then you will get the benefit of it by capital gain.
The last decade has witnessed an unprecedented growth in the trading of growth shares in the Asian market. This is due to fact that financial sector consists of a larger proportion of stocks and the trading volume in the different Asian stocks markets is very low compared to other markets.
The attractiveness of growth share has risen in the current market scenario as the there has been a widespread short term volatility in the market and companies are not able to generate so much profit.
The other reasons are lower interest rate that widens the gap between lending and borrowing interest rates, the outperformance of the software and IT companies in the Asian market and these companies are generally issue growth shares and lower taxes on capital gain as compared to dividend payout.
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