Value and Growth Stocks
Growth stocks are those companies that are considered to have the potential to outperform the overall market over time because of their future potential.
Value stocks are classified as companies that are currently trading below what they are really worth and will thus provide a superior return.
Value stocks are classified as companies that are currently trading below what they are really worth and will thus provide a superior return.
The concept of a growth stock versus one that is considered to be undervalued generally comes from the fundamental stock analysis. Growth stocks are considered by analysts to have the potential to outperform either the overall markets or else a specific subsegment of them for a period of time.
Value stocks are at least theoretically considered to have a lower level of risk and volatility associated with them because they are usually found among larger, more established companies. And even if they don’t return to the target price that analysts or the investor predict, they may still offer some capital growth, and these stocks also often pay dividends as well.
Growth stocks, meanwhile, will usually refrain from paying out dividends and will instead reinvest retained earnings back into the company to expand. Growth stocks' probability of loss for investors can also be greater, particularly if the company is unable to keep up with growth expectations.
The Bottom Line
The decision to invest in growth vs. value stocks is ultimately left to an individual investor’s preference, as well as their personal risk tolerance, investment goals, and time horizon. It should be noted that over shorter periods, the performance of either growth or value will also depend in large part upon the point in the cycle that the market happens to be in.
For example, value stocks tend to outperform during bear markets and economic recessions, while growth stocks tend to excel during bull markets or periods of economic expansion. This factor should, therefore, be taken into account by shorter-term investors or those seeking to time the markets.$Hang Seng Index(800000.HK$ $FTSE China A50 Index Futures(APR4)(CNmain.SG$ $SPDR S&P 500 ETF(SPY.US$ $Futu Holdings Ltd(FUTU.US$ $NIO Inc(NIO.US$ $Kweichow Moutai(600519.SH$ $GANFENGLITHIUM(01772.HK$ $COSCO SHIP HOLD(01919.HK$ $WUXI BIO(02269.HK$ $HKEX(00388.HK$ $TENCENT(00700.HK$ $BABA-SW(09988.HK$ $XIAOMI-W(01810.HK$ $BYD COMPANY(01211.HK$ $BIDU-SW(09888.HK$ $XINTE ENERGY(01799.HK$
The decision to invest in growth vs. value stocks is ultimately left to an individual investor’s preference, as well as their personal risk tolerance, investment goals, and time horizon. It should be noted that over shorter periods, the performance of either growth or value will also depend in large part upon the point in the cycle that the market happens to be in.
For example, value stocks tend to outperform during bear markets and economic recessions, while growth stocks tend to excel during bull markets or periods of economic expansion. This factor should, therefore, be taken into account by shorter-term investors or those seeking to time the markets.$Hang Seng Index(800000.HK$ $FTSE China A50 Index Futures(APR4)(CNmain.SG$ $SPDR S&P 500 ETF(SPY.US$ $Futu Holdings Ltd(FUTU.US$ $NIO Inc(NIO.US$ $Kweichow Moutai(600519.SH$ $GANFENGLITHIUM(01772.HK$ $COSCO SHIP HOLD(01919.HK$ $WUXI BIO(02269.HK$ $HKEX(00388.HK$ $TENCENT(00700.HK$ $BABA-SW(09988.HK$ $XIAOMI-W(01810.HK$ $BYD COMPANY(01211.HK$ $BIDU-SW(09888.HK$ $XINTE ENERGY(01799.HK$
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