Value and Growth
Two types of strategies when investing in stocks are buying either value stocks or growth stocks. While both value and growth strategies are long term investment strategies they each focus on a different part of the market and look for specific types of companies. Here are some tip on value and growth investing.
A value stock is a stock in a company that many speculators consider is undervalued in an industry. This may be an effect due to the specific company falling out of favour, focus on a more productive company in the sector or due to the company itself not advertising itself as great value.
People that invest in value stocks are sometimes considered fundamentalists. They believe in investing for the long term and look at companies that have conservative, but steady growth throughout a time period. Fundamentalists also look at the companies’ products, book value, brand recognition and earnings to make sure that the all the books are so to speak in order.
Growth investors are looking for growth stocks that have grown quickly and will continue to increase their presence, market share and earnings. While growth stocks can be used within a short term investment strategy, many investors also use these stocks for long term gains. An example of a growth stock in recent years is Google. Google launched a few years ago and continually increases their earning and for a long time their stock value.
If you are set on investing on growth stocks, value stocks or both, one of the many strategies is to invest in a mutual fund. There are many mutual funds that focus on growth stocks, value stocks or a mix of both. You can easily do a search or ask your broker on the top performing growth or value mutual funds.
Most people tend to focus on value OR growth. How can you separate the two? Growth stocks are companies that have been growing rapidly (>15% per year). Value stocks are “undervalued” to the market. Why would you ever put money in a company NOT growing rapidly and why would you ever buy a company NOT undervalued to the market?
When it comes to stock investing, growth and value are hand in hand. Only when you separate them do you lose the opportunity to not beat the market.
The Meridian Business Group Investments