Growth Investing in Singapore: A Definitive 2025 Guide

Growth Investing in Singapore: A Definitive Guide

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Growth Investing in Singapore A Definitive Guide
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Thinking about diving into growth investing but trying to figure out where to start?

You’re in the right place.

In this post, you’ll learn:

  • What growth investing is all about
  • Why it could be a good fit for you
  • The top growth sectors and companies in Singapore
  • Key strategies to maximise your returns

 

If you’re ready to explore the potential of high-growth companies, stick around.

There’s a lot to uncover!

What is growth investing?

Growth investing is all about spotting companies set to grow faster than the broader market.

Unlike value investing, where you hunt for undervalued stocks, growth investing focuses on companies with the potential to increase their revenues, profits, and share prices at an above-average rate.

Think of sectors like tech, healthcare, or fintech, where innovation drives expansion.

By investing in these high-growth companies, you’re essentially betting on their future success.

This can translate into higher returns, which is why growth investing often appeals to those with a bigger risk appetite.

Why growth investing?

Higher returns

One of the biggest draws of growth investing is the potential for substantial returns.

Growth stocks often come from companies rapidly expanding their revenues and profits.

When these companies hit their growth targets, the stock prices can soar, offering impressive returns.

You’re not just investing in what these companies are today but in what they could become tomorrow.

Most companies reinvest their earnings to fuel further growth instead of paying dividends.

This reinvestment compounds growth over time, increasing your potential for long-term returns.

Good performance in market booms

Growth stocks typically shine during economic booms.

When the economy is doing well, and investor confidence is high, these stocks tend to outperform.

Sectors such as technology, communications, and healthcare are often at the forefront of growth trends, and the sentiment around innovation drives optimism and higher valuations.

In fact, growth stocks can also be a good hedge against inflation.

Companies with pricing power, especially in high-growth sectors, are better positioned to maintain profitability even when costs rise.

What investment options are available for growth investors?

Growth stocks

Growth stocks are at the heart of growth investing.

These are shares of companies expected to deliver above-average earnings and price appreciation.

Typically, these companies reinvest profits into the business rather than paying dividends, aiming to fuel further expansion.

Examples of high-growth stocks can often be found in industries like technology or healthcare, where innovation is the key driver.

Shares of smaller companies

Smaller companies, particularly those in the mid-cap range, often grow faster than large, established firms.

These companies are in the phase of scaling up, which means they tend to outperform in terms of growth.

For investors with a higher risk appetite, these stocks can provide substantial gains as the companies mature.

However, smaller companies come with more volatility.

They’re more sensitive to market conditions and economic shifts, which can impact their performance.

But if you’re willing to take on the added risk, the rewards from investing early in a fast-growing company can be significant.

Stocks from emerging markets

Emerging markets are a hotbed of opportunity for growth investors.

These are stocks of companies based in developing economies, such as Southeast Asia, Africa, or Latin America.

The potential for growth in these regions is significant, driven by urbanisation, rising middle-class populations, and increasing demand for goods and services.

Companies in these markets often operate in sectors such as infrastructure, technology, and consumer goods, where there’s a lot of room for expansion.

While the growth potential is high, investing in emerging markets has risks, including political instability, currency fluctuations, and less mature financial systems.

However, for investors willing to navigate this uncertainty, the rewards can be substantial as these companies tap into booming economies.

Things to take note of when choosing your stocks

Revenue and earnings growth

You want to invest in companies consistently increasing their revenues and profits, as this is often a good indicator of future success.

Ideally, the company should have a record of year-on-year growth, showing that it can adapt and thrive in its market.

High revenue growth suggests strong demand for the company’s products or services, while growing earnings indicate effective cost management.

However, remember that growth stocks often reinvest earnings into the business, so don’t be put off if they don’t pay dividends.

Cash flow and debt levels

Healthy cash flow is crucial for any business, especially for growth companies that need capital to fund their expansion.

Positive cash flow indicates that a company generates enough money from its operations to cover expenses and reinvest in its growth.

When analysing growth stocks, check the company’s cash flow statements to ensure it’s not overly reliant on debt to sustain its operations.

Speaking of debt, it’s essential to evaluate a company’s debt levels.

High debt can be a red flag, which means the company might struggle during downturns or periods of slower growth.

Ideally, you want to find companies expanding without taking on too much debt, which indicates financial stability.

Keep an eye on the debt-to-equity ratio – a lower number is generally better, suggesting the company isn’t overly leveraged.

Industry trends and market potential

When selecting growth stocks, consider the company’s industry trends and market potential.

Is the industry in which the company operates growing or declining?

For instance, sectors like technology, renewable energy, and healthcare are significantly expanding, driven by innovation and rising consumer demand.

Companies in these sectors are often at the forefront of future growth, giving them more room to scale.

Also, assess the market potential.

Does the company have room to grow within its industry?

Emerging industries or untapped markets can offer exceptional opportunities, but you’ll need to ensure that the company is positioned to capitalise on these trends.

Keep an eye on how well the company is adapting to or leading changes in the industry.

Strong competitive advantage

Companies with a unique product, innovative technology, or a powerful brand can better defend their market share against competitors.

This is often called the company’s “moat” – the larger the moat, the more protected the company is from competition.

Look for businesses that have something challenging for others to replicate, whether it’s superior technology, patents, strong customer loyalty, or a dominant market position.

A company with a sustainable competitive edge will likely maintain its growth trajectory over time, even as new competitors enter the market.

Investing in companies with a solid competitive advantage helps ensure you’re backing a leader, not a follower.

Management team

Strong leadership can distinguish a company that capitalises on growth opportunities from a company that needs help executing its strategy.

When choosing growth stocks, take a close look at the track record of the company’s executives.

Have they successfully scaled businesses in the past?

Do they have a clear vision for the company’s future?

It’s also important to assess how the management team handles challenges.

Companies in high-growth phases often face growing pains, so look for leaders with experience navigating market volatility, competition, and operational hurdles.

Valuation

While growth stocks are often priced higher due to their future potential, it’s important to consider the valuation before investing.

Companies growing rapidly can command higher price-to-earnings (P/E) or price-to-sales (P/S) ratios, but you still want to avoid overpaying.

Even the most promising growth company can struggle to live up to the hype if its stock price is inflated beyond reasonable expectations.

Look at metrics like the P/E ratio or price-to-earnings-growth (PEG) ratio to gauge whether a stock is reasonably valued compared to its growth potential.

Remember that a high valuation doesn’t always mean a bad investment, but it does increase the risk.

But there are risks to growth investing too…

Rising interest rates

When interest rates go up, it becomes more expensive for companies to borrow money, hindering their ability to fund growth initiatives.

Growth companies rely heavily on borrowing to expand operations, invest in innovation, or enter new markets, so higher interest rates can slow down their momentum.

Moreover, rising interest rates can reduce a company’s valuation.

This happens because future cash flows are discounted more heavily in a higher-rate environment, making those future earnings less valuable in today’s terms.

Investors may also shift their focus towards safer, income-generating assets like bonds, which become more attractive as interest rates rise.

This can lead to a drop in demand for growth stocks, pushing their prices down.

Economic downturns

In times of uncertainty or recession, investors often become more risk-averse, favouring safer investments like bonds or value stocks.

As a result, they may sell off growth shares, causing prices to fall sharply.

Since growth stocks are typically valued based on future potential rather than current profits, their prices can be more volatile during these periods.

Additionally, many growth companies reinvest the majority of their earnings back into the business to fuel expansion.

While this strategy works well during boom times, it can leave these companies with lower cash reserves to weather economic downturns.

Without a strong cash buffer, growth companies might struggle to maintain operations, meet financial obligations, or fund new initiatives when economic conditions worsen.

This can amplify the risks, making it more challenging for growth investors to see returns during such times.

Increased volatility

These shares are often priced based on high expectations of future earnings, so even a slight miss in quarterly results can lead to sharp price drops.

This volatility becomes even more pronounced during economic downturns or market corrections, when investor confidence dips.

Growth stocks react more dramatically to negative news, such as missed earnings expectations, regulatory changes, or industry-specific challenges.

For growth investors, this means being prepared for frequent price swings, especially in turbulent market conditions.

Lack of profitability

Another common challenge in growth investing is the lack of profitability in many early-stage growth companies.

These businesses are often focused on reinvesting earnings into expansion, innovation, or market capture, which means they may still need to turn a profit.

While this strategy can pay off in the long run, it also makes them more vulnerable to external pressures, such as rising interest rates, increased competition, or economic downturns.

Without a strong profit base, growth companies may lack the financial cushion to withstand tough times.

If market conditions shift or the company faces unexpected challenges, it might struggle to sustain its operations or fund further growth.

How do growth investing strategies work?

Sector focus

A key aspect of growth investing is targeting industries with rapid growth potential.

Sectors like technology, healthcare, and renewable energy are often prime candidates, driven by innovation and high demand.

Companies in these industries tend to be at the forefront of breakthroughs that can reshape markets, making them attractive to growth investors.

For instance, the rise of artificial intelligence, digital healthcare, or clean energy has opened up huge opportunities for growth, particularly in economies like Singapore, where technology is a significant focus.

Small and mid-cap stocks

These companies are still in their early or mid-growth stages, and while they come with higher risks, they also offer higher potential rewards.

Smaller companies often have more room to grow than their larger, more established counterparts, making them a popular choice for growth investors.

However, these companies are typically more vulnerable to economic changes and market fluctuations.

They may lack the financial stability of large-cap companies and are often more volatile.

Reinvestment of earnings

Rather than distributing profits to shareholders through dividends, growth companies plug those earnings into the business.

This could mean funding new projects, expanding into new markets, developing cutting-edge technology, or hiring more talent.

By reinvesting profits, these companies fuel their future growth and aim to increase their value over time.

For growth investors, this strategy offers the potential for significant capital appreciation, although it does mean that you won’t receive regular income from dividends.

Instead, your returns come from the increased value of the stock as the company grows.

Invest in emerging industries

Growth investors often focus on emerging industries in their early stages but have significant potential to expand.

Sectors like technology, biotechnology, clean energy, and e-commerce have historically been key targets for growth investing.

These industries are driven by innovation and disruption, with companies that could fundamentally reshape markets or create new ones.

For instance, the rise of electric vehicles and renewable energy has attracted growth investors to clean energy stocks, while rapid advancements in digital health have made biotech an attractive sector.

Investing in these emerging industries can offer substantial rewards.

Momentum investing

Momentum investing is all about riding the wave of upward-trending stocks.

Momentum investors focus on stocks with a steady price rise, betting that this upward movement will continue in the short term.

The idea is simple: “The trend is your friend.”

Investors using this strategy seek to capitalise on the stock’s ongoing rise, taking advantage of market psychology and the belief that momentum will persist.

However, this strategy requires active monitoring.

Momentum can fade quickly, and if you don’t exit at the right time, you might hold a stock that reverses sharply.

Growth-at-a-reasonable-price (GARP)

Growth-at-a-reasonable-price (GARP) is a balanced approach that merges the principles of both growth and value investing.

As a GARP investor, you’re looking for growth stocks – companies with strong earnings potential – but at a price that isn’t overly inflated.

The focus is on finding undervalued companies relative to their growth potential, reducing the risk of overpaying for growth.

This helps mitigate the risk of investing in companies that are highly priced and may struggle to justify those high valuations in the future.

Your usual advice

If you prefer a more hands-off approach or are cautious about risk, Dollar-Cost Averaging (DCA) and diversification are solid strategies.

DCA involves investing a fixed amount of money regularly, regardless of market conditions.

This helps smooth out the effects of market volatility since you’ll buy more shares when prices are low and fewer when they’re high.

On top of DCA, diversification is key to managing risk in a growth investing strategy.

Instead of concentrating on just a few stocks, spread your investments across different industries, sectors, or regions to reduce exposure to any company’s performance.

For those not keen on stock-picking, ETFs (Exchange-Traded Funds) and unit trusts are great alternatives.

These investment vehicles provide access to a wide range of growth stocks, offering built-in diversification with less hands-on management.

I also have a beginner investment course currently available for free and meant for newbies and busy professionals, so check it out.

Manage your own investments like a pro, even if you're a beginner.

Enrol in our beginner investment course, tailor-made for new investors and busy professionals. Get it for free now.

Who is growth investing for?

Young professionals

If you’re a young professional just starting your investment journey, growth investing can be an attractive option.

With a longer time horizon before retirement, you can afford to take on more risk in exchange for potentially higher returns.

Growth stocks tend to be more volatile, but with decades ahead to recover from any short-term losses, you have time to ride out market fluctuations.

Plus, growth companies often reinvest profits into the business rather than pay dividends, aligning well with long-term wealth-building goals.

Investors with a high-risk tolerance

Growth investing is ideal for those who can handle a bit of market volatility.

If you have a high-risk tolerance, you’re likely comfortable with the ups and downs of growth stocks, knowing that the potential for significant returns can outweigh the short-term risk.

Investors in this category are often less concerned about immediate income (like dividends) and more focused on future capital appreciation.

They’re willing to accept temporary losses in pursuit of long-term gains.

Entrepreneurs and innovators

Entrepreneurs and those who work in innovative industries often gravitate toward growth investing because they’re familiar with the idea of backing innovation.

These investors are comfortable supporting companies that may not yet be profitable but show high potential for future expansion.

Long-term investors

Growth investing is a long game.

If you have a long-term investment horizon, such as someone planning for retirement or a big financial goal many years down the road, growth stocks can help you achieve those goals.

The longer you stay invested, the more opportunity you have to benefit from the compounding effect of reinvested earnings and market growth.

Long-term investors are less likely to panic during market downturns, focusing instead on the overall trajectory of their portfolio.

Investors looking to beat inflation

In an inflationary environment, growth stocks can be an attractive option because companies with strong growth potential often have pricing power and can pass on higher costs to consumers.

As a result, their revenues can keep pace with or outstrip inflation, making growth investing suitable for those looking to preserve and increase the actual value of their money over time.

How does growth investing perform in Singapore’s market?

Singapore’s strategic position as a financial hub and gateway to Southeast Asia makes it an attractive market for growth investing.

The city-state is known for its technology, financial services, and biotechnology sectors, which have shown strong expansion over the years.

Companies in these sectors are not only leveraging Singapore’s pro-business environment and infrastructure but are also benefiting from regional demand and government support for innovation.

In the technology and e-commerce sector, the digital boom in Southeast Asia has fueled rapid growth for Singapore-based companies.

SEA Ltd, the parent company of Shopee, exemplifies this trend as a leader in e-commerce and gaming.

Early investors in the company have reaped substantial rewards as its stock has demonstrated impressive growth, driven by continuous expansion across the region.

Singapore’s status as a global financial hub has also bolstered the financial services and fintech industries.

Companies like Grab have evolved beyond ride-hailing to offer digital payments, financial services, and investment products, all while extending their reach across Asia.

This innovation-driven transformation presents significant opportunities for investors aiming to participate in the future of finance.

The healthcare and biotech sectors have become prominent, particularly after the pandemic.

Companies such as Biosensors International, known for their expertise in medical devices, are well-positioned to benefit from the growing global demand for healthcare services and cutting-edge advancements in biotechnology.

With government support and a strong innovation-driven economy, Singapore remains a fertile ground for identifying high-growth companies across diverse industries.

Conclusion

Growth investing offers a world of potential for investors looking to maximise returns by backing companies with high growth prospects.

We’ve covered the basics of growth investing, including how it works, the risks involved, and the key sectors that offer the most promise in Singapore’s market.

We also touched on different strategies, from sector focus to momentum investing, highlighting some of the top local companies with growth potential, like SEA Ltd and Grab.

If you’re ready to dive into growth investing, or if you’re still unsure about where to start, don’t worry – you’re not alone.

Choosing the right growth stocks or strategies can be overwhelming.

If you want more personalised advice, feel free to chat with one of our financial advisor partners for free.

They’ll help you determine if growth investing suits your financial goals and how to make the most of it in Singapore’s ever-evolving market.

References

Picture of Firdaus Syazwani
Firdaus Syazwani
In 1999, Firdaus's mother bought an endowment plan from an insurance agent to gift him $20,000. However, after 20 years of paying premiums, Firdaus discovered that the policy was actually a whole life plan with a sum assured of $20,000, and they didn't receive any money back. This experience inspired Firdaus to create dollarbureau.com, so that others won't face the same problem of being misled or not understanding what they are purchasing – which he sees as a is a huge problem in the industry.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Dollar Bureau and its affiliated parties is not meant to be construed as financial advice. Dollar Bureau shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

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