In the investing community, never has there been a term more misunderstood than growth stock. To many, a growth stock simply means a name stock or a stock with a lot of demand. To others, it is just one of the stocks selling at high earnings multiples.

Being "name" or popular is not necessarily synonymous with true growth. More often than not it is a stock which has already seen its growth. You are not likely to make money with a stock which has already made a lot for others.

Whenever speculative fever runs high, investors tend to overreach for popular stocks. One widely held misconception, especially in periods of market excesses, is that growth stocks constitute a sort of different species and are, therefore, somewhat above reasonable price-earnings ratios, which are generally accepted as the basic criteria for stock prices.