What are Growth vs. Value Stocks?
Growth stocks are of companies, mostly from high-growth industries, expected to grow and provide above-average returns faster than other stocks. They offer high growth but are highly volatile and don’t typically offer high-dividend.
Value stocks are mostly of already-established companies, which are undervalued and offer lucrative, low-risk investment opportunities. They offer high-dividend and are relatively less affected by market volatility.
Learn all you need to know about growth and value stocks at Money & Advice!
- David Adebomi
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- 05:00
- Hours Ago
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FAQ
Growth investors are looking for faster growth and higher profits, even if it means investing in stocks with higher valuations. It helps with enhanced capital appreciation in a relatively short period.
Value investors typically look for investing in stocks of companies that are fundamentally strong but undervalued. Value stocks often trade at a lower P/E ratio.
Value investors invest in these stocks, hoping the stock’s price will appreciate to its technically-deserving intrinsic value over time.
Growth stocks are relatively riskier due to their higher valuations, often based on their future growth and income potential, which may not materialize.
Value stocks are relatively low risk as they’re already undervalued.
However, it’s always important to note that stock market investments accompany substantial risk, and even prices of value stocks can remain undervalued for long periods or even decline further.
Stock markets are volatile, and there is no foolproof strategy or method to predict market movements.
The best way to determine if you should invest in value vs. growth stocks is to ascertain your financial goals, time horizon, and risk appetite. Having a balanced approach and diversifying your portfolio to include both stock types is ideal.
Growth stocks are commonly associated with new, innovative, fast-moving sectors like biotech, technology, and consumer discretionary.
Value stocks are typically found in traditionally robust sectors like energy, financials, and utilities.
The best way to land on profit-making stocks is by performing technical analysis, keeping a watch on market trends, checking P/E ratios, tracking dividend history, going through annual financial reports of the companies, and more.
Get insights and updates to find the best growth and value stocks in the United States on Money & Advice.
