Which term describes securities that are expected to have higher future earnings?

The correct answer, growth stocks, refers to securities anticipated to grow at an above-average rate compared to their industry or the overall market. Investors often seek out growth stocks because they represent companies that are expected to increase their earnings significantly over time due to factors such as innovation, market expansion, or operational efficiencies.

Growth stocks typically reinvest their profits back into the business for further expansion rather than paying dividends, which makes them appealing to investors looking for potential long-term capital gains rather than immediate income. This expectation of higher future earnings is a defining characteristic of growth stocks and differentiates them from other types of stocks.

Income stocks, on the other hand, are associated with stable companies that offer regular dividends, making them attractive for those seeking steady income rather than rapid appreciation in value. Value stocks are often seen as undervalued by the market, with potential for price increases, but they do not necessarily represent high future earnings expectations. Blue chip stocks are well-established companies known for their reliability and solid performance, but they do not inherently represent the same level of anticipated growth as growth stocks.