Investors tend to lump their stock investments into either growth or value. And most investors have an idea of what each of those terms mean. But they’re also investor-specific. One investor’s value play may be a more of a growth play to another.

It’s also easy to call a stock growth based on one or two factors. But it may be a confluence of factors that make an investment truly a growth story compared to a lucky trade.

For instance, some growth investors look for a company that’s building customers and revenues, but may not be earning a profit yet. Others may look for a company that can grow beyond cash flow to actual profits.

One component to identify growth stocks is a company with a high net profit margin. That can show what a company brings in before its expenses, before growth profits. That may be more important than the current valuation of a growth stock.

But no matter what metric an investor prefers for growth, understand that good investments compound. A company with compounding growth will be better than a more cyclical company that oscillates between growth and contraction.

Companies that can deliver long-term compound growth offer the best returns over time. Adding those companies to your portfolio gives you compounding wealth as well.

For the full read on why growth matters, click here.

Investors seek alpha. That’s a simple term used to denote the profits made above and beyond the risk involved. Earning 30% in a portfolio of common stocks in a year the index returns 20% generates significant alpha.

But investors need to be aware of negative alpha. That means being in the wrong stocks at the wrong time. And underperforming the overall market as a result.

Generally, most investors tend to follow the market. If stocks have been rising, they throw caution to the wind and increase stock positions. Or, worse, take riskier positions.

When stocks fall, investors move to the sidelines after a decline. That’s also a recipe for poor returns.

Instead, investors may want to employ a strategy that moves contrary to the market. That means buying stocks when they’re down and fear is on the rise. Or selling stocks when prices are soaring higher.

Investors tend to think of cash as a poor investment decision. Over the long-run, that’s certainly true as inflation eats away savings. However, during a bear market, when stocks fall 20% or more, cash’s relatively flat return can prove a lifesaver.

And when stocks start to trend higher again, traders who lean into a rebound can see increased returns. This leads to improved gains and the avoidance of negative alpha during a market cycle.

To listen to the full strategy to eliminate negative alpha, click here.