{"id":40269,"date":"2025-12-08T23:56:00","date_gmt":"2025-12-08T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=40269"},"modified":"2025-12-15T09:07:23","modified_gmt":"2025-12-15T01:07:23","slug":"investing-for-growth","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/","title":{"rendered":"&#8220;Investing for growth&#8221;"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Author_of_this_book\" >Author of this book<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Reasons_for_recommending_this_book\" >Reasons for recommending this book<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Book_Content\" >Book Content<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Authors_Investment_Performance\" >Author&#8217;s Investment Performance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Investment_Strategy_and_Methodology\" >Investment Strategy and Methodology<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Portfolio_and_Focus_Areas\" >Portfolio and Focus Areas<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Author_of_this_book\"><\/span>Author of this book<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The author of &#8220;<em><a href=\"https:\/\/www.amazon.com\/Investing-Growth-companies-anthology-investment\/dp\/0857199013\" target=\"_blank\" rel=\"noopener\">Investing for Growth<\/a><\/em>&#8221; is Terry Smith. I previously introduced one of his articles on my blog, titled &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/11\/22\/bet-on-dominant-player\/\">Bet on dominant player, don&#8217;t predict<\/a>&#8220;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_for_recommending_this_book\"><\/span>Reasons for recommending this book<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There aren&#8217;t many books specifically written about growth investing, and even fewer that are of decent quality. This book is above average. I&#8217;ve personally compiled a list of several growth stock investing books for readers; those interested can click here for <a href=\"https:\/\/granitefirm.com\/us\/investing\/reference\/growthinvestingbooks.html\" target=\"_blank\" rel=\"noopener\">\ud83d\udcdaGrowth Investment Books<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Book_Content\"><\/span>Book Content<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Authors_Investment_Performance\"><\/span>Author&#8217;s Investment Performance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The author is the manager of the UK-based Fundsmiths equity fund. The Fundsmiths fund&#8217;s performance is as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>From 2010 to 2021, the 10-year internal rate of return (IRR) was 18.4%, while the MSCI&#8217;s was 11.6% during the same period\u2014this is the main focus of the book. The fund ranked third in performance over the past five years, according to the Investment Institute&#8217;s global equity category, which includes 270 funds.<\/li>\n\n\n\n<li>My additional notes: As of October 31, 2025, year-to-date return (as of October 31, 2025): +3.3%, full year 2024: +1.0% (Note: slight differences exist between different share classes), annualized return since inception (November 2010) to October 31, 2025: +14.0%.<\/li>\n\n\n\n<li>The Fundsmith Equity Fund achieved an annualized return of 14.0% over 15 years from its inception (November 2010) to October 31, 2025. Although this is a significant decrease from the 18.4% return from 2010 to 2021, it is still a very good performance for an equity fund (please note that this is a performance over 15 consecutive years, not 3 or 5 years).<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investment_Strategy_and_Methodology\"><\/span>Investment Strategy and Methodology<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Fundsmith Equity Fund&#8217;s &#8220;Ten Investment Principles&#8221; mentioned by the author in the book are worth reading.<\/p>\n\n\n\n<p>Fundsmith invests only in companies that meet the following criteria:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>High Return on Equity (ROE)<\/li>\n\n\n\n<li>Some or all of its profits are converted into cash<\/li>\n\n\n\n<li>Higher profit margins<\/li>\n\n\n\n<li>A strong track record of economic resilience over decades<\/li>\n<\/ul>\n\n\n\n<p>Fundsmith&#8217;s basic investment steps:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Invest in excellent companies<\/li>\n\n\n\n<li>Never pay too high a price<\/li>\n\n\n\n<li>Wait for opportunities<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Portfolio_and_Focus_Areas\"><\/span>Portfolio and Focus Areas<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Fundsmith&#8217;s portfolio is as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Prefers operating cash flow over price-to-earnings ratio, with an average P\/E ratio of 21 compared to 19 for the MSCI World Index<\/li>\n\n\n\n<li>ROE of 34%, compared to 19% for the S&amp;P 500 non-financial sector<\/li>\n\n\n\n<li>Yield of 2.3%<\/li>\n\n\n\n<li>Number of companies invested in is less than 30<\/li>\n<\/ul>\n\n\n\n<p>Fundsmith focuses on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Concentrated investing, with most fund managers in most countries holding no more than 25 companies<\/li>\n\n\n\n<li>ROE, Gross Margin, Operating Profit Margin<\/li>\n\n\n\n<li>Cash Conversion Rate (CCR) = Operating Cash Flow \/ Net Profit or Operating Cash Flow \/ Interest, Taxes, Depreciation, Amortization, and Earnings (OCF\/EBITDA)<\/li>\n\n\n\n<li>Leverage Ratio = Total liabilities\/total equity (his fund&#8217;s ratio is 1\/4, while the market average is 40%)<\/li>\n\n\n\n<li>Interest coverage ratio = EBITDA \/ Interest (his fund&#8217;s ratio is 15, while the market average is 10)<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"90\" height=\"135\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2025\/11\/Investing-for-growth-Custom.jpg\" alt=\"Investing for growth\" class=\"wp-image-40270\"\/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/08\/investing-for-growth\/\">Investing for growth<\/a>&#8220;<\/li>\n\n\n\n<li> &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/06\/17\/why-i-prefer-growth-stocks-instead-of-value-stocks\/\">Why I prefer growth stocks instead of value stocks?<\/a>&#8221; <\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/21\/growth-vs-value-investing\/\">Growth vs. Value Investing, Buffett&#8217;s view<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/29\/inflation-and-rate\/\">Tax, inflation and rate are the top three serious killers to investors<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/06\/03\/growth-stocks-plunge-2\/\">Why growth stocks plunge, part two<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/05\/31\/growth-stocks-plunge-1\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why growth stocks plunge, part one<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/13\/nike-growth-role-model\/\">How does Nike make money? The role model of growth stocks in non-tech industry<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/05\/16\/civilian-production\/\" target=\"_blank\" rel=\"noreferrer noopener\">Discover the possibility of super growth stocks in the civilian production industry<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/11\/22\/bet-on-dominant-player\/\">Bet on dominant player, don&#8217;t predict<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The author of &#8220;Investing for Growth&#8221; is Terry Smith. There aren&#8217;t many books specifically written about growth investing, and even fewer that are of decent quality. This book is above average.<\/p>\n","protected":false},"author":1,"featured_media":40270,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,33],"tags":[],"class_list":["post-40269","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-books","category-growth-investing"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/40269","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=40269"}],"version-history":[{"count":9,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/40269\/revisions"}],"predecessor-version":[{"id":40613,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/40269\/revisions\/40613"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/40270"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=40269"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=40269"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=40269"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}