For most small investors who buy stocks without a financial plan, Growth Stocks vs. Value Stocks are the critical difference between success and failure. When you can only buy Growth Stocks or Value Stocks when the markets are down, that’s a recipe for disaster. It’s easy to invest in low-priced Growth Stocks, especially when you have no financial plan, but it’s not easy making a profit on them without a well-planned long-term plan.
Most people don’t realize that the S & P 500 has been declining since the end of the Great Depression, and many people see value stocks as being under-appreciated. The S & P 500 is simply a price-based index that tracks stock prices. Growth Stocks vs. Value Stocks therefore only make sense if you view the index from a long-term investment perspective.
If you want to buy small-cap growth stocks without an investment plan, Growth Stocks vs. Value Stocks will not help you. In fact, it could cost you your business!
Growth Stocks vs. Value Stocks assume that the time horizon is one year to five years. This assumption may not be correct. I recommend looking at the stock charts of the companies you like, or of companies that you believe are good growth stocks. Then look at their stock price history over the last five years. If the stock price is consistently higher over this period than the company’s stock price, it’s a growth stock.
On the other hand, if the stock price is consistently lower than the company’s per-share earnings, it’s probably a value stock. Growth Stocks vs. Value Stocks assume that a company’s earnings will continue to increase over the long term. They don’t factor in dividends, however. If a dividend is paid, it’s usually noted and included in the valuation.
There are some special situations where growth stocks should be bought, especially by investors who can control their own risks. For example, if a technology company is about to enter a new market, or if it’s in the process of developing a new product, then it makes sense to buy now. The time can be very profitable, as the company can attract a large number of buyers. This can result in a sharp increase in price.
Growth companies are also great choices during slow periods in markets. A company can benefit from a correction when interest rates are falling. This can keep the share price from dropping too much and cause a sharp drop. If you’re looking for a good growth stock to buy at this time, do some research on the companies in the top 10 and find out what they were doing when they had the good years.
Value stocks are usually thought of as lower-risk options. The reasoning behind this is that if the company goes through bankruptcy or gets into serious trouble, the shareholders won’t be so impacted. It’s also believed that by definition, a stock doesn’t have to pay a dividend. Thus, the value may be seen as being somewhere in between growth and value.
There are many factors that need to be considered when determining which of the two categories a stock is. You will need to determine if the company has the potential for growth if the price is reasonable given the potential and if the management team is stable.
If you’re able to use one or both of these criteria, you’ll have a much better chance of finding growth stocks vs. value stocks. However, if you’re just looking for a good buy, growth may be your best bet.
Growth stocks typically have a history of paying high dividends. In fact, the history of the American economy has been mostly about dividends. Dividends have encouraged more investment in the past, and the current economic environment is likely to continue that encouraging trend. This means that there’s money to be made if you can choose a strong, high-quality growth stock. Just make sure you choose the right one.
A growth stock is great because they usually don’t require you to pay a capital gain tax until you sell. Plus, their prices are always fairly stable, meaning you can purchase and sell them for just about any amount. Growth stocks don’t have the same issues that value stocks do. They tend to have a higher return on investment, due in part to the fact that they don’t have as many competitors. They also have low expenses, so you won’t lose much money over the long haul.
It’s important to keep your options open when choosing growth stocks vs. value stocks. Each option has its advantages and disadvantages. Try to choose your strategy based on the information you can find. If you’re investing in companies that have recently become profitable, you’ll probably want to focus on that. However, if you’re just interested in finding out which stocks are set to grow in value, then you should use a value-based strategy.
