Kay Powers wants to diversify her portfolio by investing in a firm that has the potential to earn above average profits compared to other firms in the economy.What type of stock is Kay thinking about adding to her portfolio?
A)Defensive stock
B)Cyclical stock
C)Small cap stock
D)Blue chip stock
E)Growth stock

Question

Quizplus · Accepted Answer

Growth stocks are shares in companies that are expected to grow at an above-average rate compared to other firms in the economy. Investors like Kay Powers, who are looking to diversify their portfolio with the potential for higher profits, often look to growth stocks as they offer the possibility of substantial returns. These companies typically reinvest their earnings into further expansion, innovation, or development, rather than paying dividends, which can lead to increased stock prices over time.

Kay Powers Wants to Diversify Her Portfolio by Investing in a Firm