value and growth investing strategies

investing for beginners

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what's in this lesson?

Okay, time to strategize. What are some big-picture investing strategies and how can they inform your investment choices? Let’s talk about growth and value investing strategies.

value and growth investing strategies

investing for beginners

Okay, time to strategize. What are some big-picture investing strategies and how can they inform your investment choices? Let’s talk about growth and value investing strategies.

what's in this lesson?

Okay, time to strategize. What are some big-picture investing strategies and how can they inform your investment choices? Let’s talk about growth and value investing strategies.

overview

In the previous lesson, we talked about a couple key factors that inform investor confidence in a company, including growth and profitability. From an investor perspective, these key terms, growth and profitability, often guide decision-making on what companies to buy.

 

Value Investing

Essentially, a company can drive value for an investor in two ways–one by growing revenue or profitability significantly and causing the stock price to increase, or by being very profitable and delivering money back to shareholders (this is called a dividend). There are some companies that investors don’t necessarily expect to grow much, but might be undervalued due to their profitability. Often these companies pay out dividends to shareholders. Investing primarily in companies that are profitable, that might be undervalued by the market, and that pay a dividend is generally referred to as a “value investing strategy.” Value investing is generally perceived as less risky, but also has less upside potential.

 

Growth Investing

Conversely, some companies are not yet particularly profitable (if at all) and look to grow their company valuation through revenue growth. So they likely won’t be paying dividends to shareholders, but instead they’ll reinvest money into the company and try to get more customers. Shareholders will gain value when the price of the stock increases. Investing primarily in these sorts of companies is called a “growth investing strategy,” which involves higher risk but carries more upside than a “value” investing strategy.

 

Small, Medium, and Large Caps

You’ll also hear reference to small, medium, and large cap stocks–this is in reference to the size of the company in question. Check out our resources to find the chart most commonly used to indicate where an investment lands on the strategic scale of size and growth/value.

 

Now, being the savvy investor you are, you won’t just dive in on one of these strategies. It’s often wise to try to balance these two investing strategies in your portfolio.

 

Source(s): Merrilledge.com

overview

In the previous lesson, we talked about a couple key factors that inform investor confidence in a company, including growth and profitability. From an investor perspective, these key terms, growth and profitability, often guide decision-making on what companies to buy.

 

Value Investing

Essentially, a company can drive value for an investor in two ways–one by growing revenue or profitability significantly and causing the stock price to increase, or by being very profitable and delivering money back to shareholders (this is called a dividend). There are some companies that investors don’t necessarily expect to grow much, but might be undervalued due to their profitability. Often these companies pay out dividends to shareholders. Investing primarily in companies that are profitable, that might be undervalued by the market, and that pay a dividend is generally referred to as a “value investing strategy.” Value investing is generally perceived as less risky, but also has less upside potential.

 

Growth Investing

Conversely, some companies are not yet particularly profitable (if at all) and look to grow their company valuation through revenue growth. So they likely won’t be paying dividends to shareholders, but instead they’ll reinvest money into the company and try to get more customers. Shareholders will gain value when the price of the stock increases. Investing primarily in these sorts of companies is called a “growth investing strategy,” which involves higher risk but carries more upside than a “value” investing strategy.

 

Small, Medium, and Large Caps

You’ll also hear reference to small, medium, and large cap stocks–this is in reference to the size of the company in question. Check out our resources to find the chart most commonly used to indicate where an investment lands on the strategic scale of size and growth/value.

 

Now, being the savvy investor you are, you won’t just dive in on one of these strategies. It’s often wise to try to balance these two investing strategies in your portfolio.

 

Source(s): Merrilledge.com

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