Growth and value investing seem to be relatively similar. Both investment strategies are based on buying low and selling high, making a profit in the middle. However, they are two very different styles of investing.
Value investors look for stocks that are already performing well in terms of revenue and earnings, but which the market has undervalued for some reason. The idea behind value investing is that the stock price will eventually make it back to fair market value, giving the value investor an opportunity to gain.
As a result of the methodology behind the strategy, value stocks don’t experience much volatility, and risks are relatively minimal when the proper research is done before investments are made.
Growth investing is about finding stocks that are likely to see growth in revenue and earnings. While the goal is to find growth at a reasonable price, these stocks are already trading at or above fair market value, and investors who buy them are banking on the high probability of volatility.
