New Users click here to register Growth Investing vs Value Investing Growth and Value are essentially two contrasting investment styles that are offered by funds. Under the value investing philosophy a fund manager picks stocks that are perceived to be quoting below their intrinsic worth or stocks that command valuations lower than those seen in the industry or in the market. Normally, value stocks exhibit low price to earnings multiples and at times also show high dividend yields. Therefore, a fund manager following the value trading approach does not need to trade actively. Once the stocks have been identified and picked, the fund manager waits for them to realize their potential value.
Growth investing is very different.
Stocks picked under this approach exhibit high revenue and earnings growth. A fund manager, under the growth investing approach, therefore, bets on continuously rising earnings and does not look at valuations. Both styles have their positives and negatives. In value investing, correct stock valuation and right time of entry are important-since a fund manager would not like to get too early into a stock. In growth investing on the other hand it is necessary for the fund manager to identify businesses that face little threat of erosion so that earnings growth of those companies are not impacted.