Definition Of Growth Vs Value Stocks

Growth and value are two fundamental approaches or styles in stock and mutual fund investing.

Definition of growth vs value stocks. A balanced diversified portfolio will hold both value stock and growth stocks. Broadly speaking when looking at value vs growth stocks both are stocks that are priced attractively relative to their fundamentals and peers. Rather the difference lies mainly in the way in which they are perceived by the market and. Therefore value stock funds can be purchased for the purpose of long term growth although the name or objective isn t literally growth although growth stocks have potential for outperforming value stocks a historical study by fidelity shows that value stocks actually outperformed growth stocks for the 26 year period between 1989 and 2015.

When it comes to labeling individual stocks as either value or growth there can be some disagreement for those companies near the edge of either definition. Growth and value aren t the only two methods of investing but they are a way for investors to make a cut at stocks for investing purposes. Growth investors seek companies that offer strong earnings growth while value investors seek stocks that appear to be undervalued by the marketplace. In contrast to value stocks growth stocks are equities of companies with strong anticipated growth potential.

As the name implies growth companies by definition are those that have substantial potential for growth in the foreseeable future. Investors expect growth stocks to earn substantial capital gains as a result of strong growth in the underlying company. The main way in which they differ is not in how they are bought and sold nor is it how much ownership they represent in a company. 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.

Value stocks growth stocks differ from value stocks. Learn more and get an understanding of these two investing strategies.