Value Investing
The friend of a novice investor and also of a risk-taker, Value Investing is all
about investment in stocks that are undervalued and possibly ignored by investors
but have a possible scope for appreciation in the future. Value investors believe
that the market movements, being emotionally triggered, don’t offer a fair
view of the company’s performance. A negative slide in the stock prices of
companies is looked at as an opportunity by these investors.
Value investing entails looking at Price-to-book and Price-to-earnings ratios of
stocks that are lower than average and compared with the company’s intrinsic
value. An investment is made when this value is high enough after considering a
safety margin for calculation inadequacies.
Growth Investing
Arguably the most popular investment method, Growth Investing entails focusing
purely
on capital appreciation. Growth investors choose stocks whose prices are expected
to grow at a better rate as compared to its peers. There are many ways to create
an investment plan that focuses on a capital appreciation. Some such strategies
include investing in small cap stocks with a huge potential to grow or blue chip
stocks or emerging market stocks.
Growth investing requires an analysis of the company’s historical performance
and overall management to assess the possibility of generating returns that outperform
the market averages.
Growth and Value Investing can also be deployed as two elements of a portfolio to
benefit from the current performers as well as the underdogs. Typically, growth
investing earns returns when the market is rising and value stocks perform when
the markets fall.
Show More