Difference between Growth and Value Investing

Growth and value investing are investments approaches which are used when one is investing into equity markets and there is always a conflict between people whether to use growth investment approach or value investment approach. Before deciding which is the best approach one should look into detail how both the approaches work

Growth Investing – The person who is following a growth investment approach is looking for capital appreciation of his or her wealth, in simple words the investment is done for long term rather than short term. When one invest in growth stocks than he or she is not looking for constant income in the form of dividends rather individual is more interested in company putting money into for expansion purpose rather than giving dividends as over the years it will lead to capital appreciation for both the company and its shareholders.

Value Investing – The idea behind value investing is that one should buy the stocks of those companies which are being sold due to panic in the markets or some specific news regarding a particular stock which though is not good for stock in short term but it is good for long term prospectus of the share. Value investing is also known as bargain hunting as the price of stock in panic selling falls below its true value. However one needs to have sound knowledge about the factors which affect the stock and determine its true value such as earning per share, PE ratio, future projected sales and position of the company in relation to the industry.

As one can see from the above discussion that both the approaches of investing are different and therefore it depends on the mindset and objectives of the investors whether he or she choose growth investing approach or value investing approach.

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