There are three types of investing strategies most widely used by stock market investors.
Value Investing
Growth Investing
Moment Investing
This blog will mainly focus on the difference between value investing and Growth investing.
Difference between value investing and growth investing
1. Value Investing Meaning:-
In this type of investing, investors look for stocks that are undervalued in the market as compared to their real value (Intrinsic value). Investors catch them at a low price and hope to make them multi-bagger stocks. They believe that the market overreacts to good and bad news about the company. The stock price of the company keeps on fluctuating in the short term. However, a company having good fundamentals will deliver good returns in the long run. Market fluctuation gives value investors the chance to get good stocks at discounted prices.Value investors sell stocks when the price of stocks reaches their real value (intrinsic value). The PE ratio of value stocks companies is less as compared to related industry standards. Value investing is comparatively safe and gives good profits to investors in the long run. Warren Buffett famous celebrated investor used a value style of investing.
2. Growth Investing Meaning:-.
Growth type of investors invest in emerging fast-growth companies that have the potential to give high returns in the future. Growth investors ignore the high PE ratio or the high stock price value of these stocks but look at the future potential growth of the stock. The stock of these companies is in great demand because of future prospects. The stock valuation of these companies is high but investors still bet on them to get extraordinary returns. Investors justify their investment in high-value stocks by predicting very high returns from them. You can find growth stocks in Large-cap, Mid-cap, or small-cap stocks. But mostly you can find them in Midcap and Small caps companies. This type of investing is risky as compared to value investing because investors are betting on companies whose valuation is already high. Investors’ bets may go wrong regarding companies’ future business prospects and demand.
Both strategies have diehard followers. Many investors used a blended type of investment strategy. In which they will invest in both Value and Growth stocks. When the market is in the bull phase, Growth stocks will give good returns. But when the market is in slow down or bear phase, the returns of these stocks get drastically down. Value stocks are more stable in a bear market.
In Moment investing, investors buy those stocks that are showing upward trends in the market and sell those stocks that are showing downward trends. They believe that market trends sustain for quite some time. You can make a profit by following these trends. No matter how long the trend continues, you will remain invested till the trend changes. Moment investors use the technical indicators and charts to decide on entry and exit points.
Conclusion. :–
Whatever strategy one uses, Real Stock investing revolves around the strategy of buying the stocks at a discounted low price and selling them at a high price to earn maximum profit.
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