Before we can answer that, lets first define what a “value stock” is and what is considered a “growth stock.”
Keep in mind, the following definitions are not hard and fast rules, but rather broad ideas/principals, and investors will have slightly different definitions or thresholds as to which bucket a stock should be placed.
Some key characteristics of value stocks are-
The key characteristics of growth stocks are-
In addition to looking at and understanding the value vs. growth question, investors also need to consider whether to purchase individual stocks, mutual funds, or ETF’s to implement these strategies.
Some general rules of thumb-
Growth may be right for you if you’re comfortable with larger price movements and you aren’t in need of current income (by way of dividends). However, you might prefer value if you’re looking for more stable investments that regularly pay dividends. There’s also a case to be made for including both value and growth in your portfolio to smooth out times of volatility and capture the best of both worlds.
Value vs Growth, which is better for you?
Your preference for, or belief in, value vs. growth typically comes down to your investment objectives, risk tolerance, and time horizon. You may prefer to achieve exposure to growth or value, or some combination of both. Again, these are broad strokes, the devil is in the details, so doing a thorough analysis (as always) should be done prior to any investment decision.
-Paul R. Rossi, CFA
Paul R. Rossi, CFA