Growth Stocks Or Value Stocks – Where Should You Invest?

Growth stocks and value stocks are two of the most common stock categories that you will stumble upon when you do your research about stock market investing. There have been a lot of debates on which type of stocks can provide bigger profits to the investor. Before you take a leap into stock market investing, it would be a good idea to have a good understanding of these two categories of stocks. It is also a good idea to consider what their advantages and disadvantages are so that, at the end of the day, you will be able to come up with a good investing decision.

When you hear someone say that the stocks of a particular company are growth stocks, it simply means that the stocks are expected to surge at a higher rate compared to the performance of the overall market. Some of the reasons why these stocks have tremendous growth potentials include high levels of publicity and popularity among investors. As a result, most of these stocks are usually overpriced. On the contrary, value stocks tend to trade at lower prices compared to the market fundamentals. In fact, these stocks are often considered undervalued.

The first impulse of new investors is to put all their money in growth stocks. There is really nothing wrong with this strategy if the timing is perfect. You will surely earn a lot of money if you were able to buy growth stocks at a lower price and then offload them before their price start to fall. One thing that you need to know about this type of stocks is that they usually do not provide dividends and their price can go up in one day and suddenly plummet the next day. Meanwhile, value stocks are usually issued by companies that provide regular dividends and are considered to be more stable. Value stocks can provide you with a regular stream of income through dividends.

Both growth and value stocks have their own pros and cons. In order to minimize risk and increase chances of earning profits, a number of seasoned investors combine growth and value stocks in their portfolio. In fact, Warren Buffet, a man known to be risk averse, also owns growth stocks. In order for you to minimize your exposure to losses, it would be best to find a good and dependable source of information about the stock market. It will be an important tool in guiding you which stocks, whether value or growth, to invest in and at what time.