Should I buy growth stocks for 2023?

I’m general, but in 2022, most growth stocks are declining. There are several reasons for this, but perhaps the most important is that the 2020/2021 bull is not sustainable.

In my portfolio, dividend stocks always do better than growth stocks. And that means I feel very little of the growth stock crash that wiped out billions in growth-focused funds over the past 18 months.

In fact, even the most growth-focused investors lose money. Cathy Wood Ark portfolio has lost most of its value. According to the data, his nine ETFs fell to $11.4bn in December, from a peak of $60.3bn in February 2021.

So as we head into the new year, should I increase my exposure to growth stocks?

Why are growth stocks collapsing?

The stock is rising in 2021 and is trading at multiples of earnings or earnings. Eventually, and predictably, there was a sell-off, prompted by a rise in treasury yields that made growth stocks more expensive.

While some stocks continue to perform in 2022, the macroeconomic environment, characterized by rising inflation, higher debt costs and recession forecasts, remains challenging for most.

An important factor is the interest rate. Higher borrowing costs increase the cost of growth. Companies with fewer debt obligations and plenty of cash may fare better than their cash-poor peers heading into 2023.

Risk vs reward

In 2020, Wood was named the best stock-picker of the year by Bloomberg news editor-in-chief emeritus Matthew A Winkler.

Wood’s disruptive investments increased in 2020 and the performance of his portfolio, named after the Ark of the Covenant, gained notoriety.

However, losses of almost $50bn over the past 18 months show the risks associated with this area of ​​the market.

limited light

I prefer only limited exposure to growth stocks. Especially in the current macroeconomic environment that looks very similar to the situation at the end of 2022.

However, I recently added some growth-focused stocks to my portfolio. For example, I bought it Chemical and Mining Society of Chile and Li Auto. The decision is based on China’s decision to lift Covid-19 regulations and reopen the country to international travel.

Chinese auto stocks have been challenged by lockdowns and restrictions that have put strain on supply chains. But 2023 should be a better year. And despite the global economic downturn, I bet that the demand for lithium – the main product of SQM – will continue to grow throughout the year.

To that end, I also bought more shares NIOalso Mortgage Scotland, which has dropped 50% over the past 12 months. I chose the latter because the fund manager has an excellent track record of picking the next winner.

So I bought another growth stock. But they still represent only a small part of my portfolio.