Saturday, 6 February 2016
Should you invest for growth or for value? It doesn’t matter.
The world of stock investing is not only full of jargon but also theories. Two theories of the many theories are growth investing and value investing. Going by conventional definitions, growth investing seeks to invest in those companies that have above-average chances of growing their revenues. Value investing, on the other hand, is about investing in those companies that are unappreciated at the moment and could get rerated.
Which is better? Which should you follow? It hardly matters.
When you invest in stocks, you are always better off keeping it simple. How does it matter if it's a growth company or a value company? Remember just one aim: Make money. You invest for no other reason but to make money. It doesn't matter what theory you apply.
Growth investing and value investing aren't the only two forms. There is “momentum” investing and there is dividend investing and what not. The financial community has devised numerous terms to make stock investing confusing for the layman. What's more, when investors practice one theory, they feel that that's the best theory. They show more allegiance to their theory than the obvious aim of making money, which only limits their options, outlook, and prospects of success.
Why be just a value investor? Why be just a growth investor? If you can make money in multiple ways, why stop yourself. The more ways of thinking you have the better investor you become. As a matter of fact, if you can keep conflicting ideas and use them as needed, you can do really well—at least in the stock market.