Start-ups that still have considerable growing to do often don’t make a profit yet. And when they do start making a profit, they often decide to reinvest it for even more growth. The idea is for this growth to push up the share price to benefit shareholders. This kind of share is what we call a ‘growth share’. Companies that have been around for some time generally grow at a slower rate and tend to have a more stable revenue stream. It allows these companies to pursue a policy where they pay more of their profits out to shareholders in the form of a dividend. Shares in these kinds of companies are called ‘dividend shares’. Put simply, returns on dividend shares come mainly from the dividend paid on these shares. Growth shares, on the other hand, generate returns mainly when their price goes up. Needless to say, returns are not guaranteed in either case. Growth share prices tend to be more volatile, meaning that there is a greater chance of them going down.
This explanation does not always apply. Results depend on specific situations and shares.