What is growth investing >> Value Investing vs Growth Investing
Rishi Kashyap
8.69 K

Value Investing vs Growth Investing


We have detailed about what is Value Investing before, in this Share Market tutorial.
Below we explain its difference from Growth Investing !

Value Investing vs Growth Investing
Value Investing is finding undervalued stocks, let us say with Intrinsic value of 100 Rs and buying them at a much lower price, perhaps at 50 Rs or lower.
Once the price corrects Value Investors sell the share in hefty profit !

Growth Investing is finding growth stocks, let us say with present Intrinsic value of 100 Rs and buying them at perhaps 120 Rs or higher because we expect company to grow and future price to go much higher perhaps 500 Rs or 600 Rs or even more !
Value Investing vs Growth Investing
Following are the mark difference in strategy of Value Investor and Growth Investor :

  1. Value Investor intention is to sell when Shares are overvalued !
    Growth Investor knows that share will become overvalued but he holds it for more growth.
  2. Value Investor has an intrinsic valuation based on past historical performance, he is not predicting the future performance !
    Growth Investor is trying to predict the future performance and buys basis that future valuation.
  3. Value Investor has few months to few years holding vision for the Stock of the company.
    Growth Investor has few years to decades to life-long holding vision for the company. The idea is holding the share till the company grows !

Growth Investing strategy
Growth Investing is nothing else then an example of Power of compounding.  You want to invest in the shares of companies,  which grow their earning and hence the share price.

We will detail about it in coming chapters of this section. However, we have also tried explaining it before by
  1. Compound Interest simplified
  2. Rule of 72
  3. Getting rich simplified
  4. CAGR Calculator
  5. Good Stocks vs Great Stocks (Plz read Small Cap vs Mid Cap vs Large Cap Stocks)

Is value investing dead ?
These days many stock traders and growth investors declare that Value Investing has lost its value (pun intended).
I have told before, worth repeating though, if you do not know how to value a stock, its is not investing,  its speculation !

Many Stock Investors have burnt money by loosing patience and buying a growing company at so high price that it took long years to break even, even after expected growth. Investing in growth stocks does not mean "Growth at any price" !
Margin of safety still prevails, "growth at reasonable price" is the winning mantra !

In coming chapters we will discuss Mr Warren Buffet investment strategy to understand how he judged future performance and what all he saw in share of a company before investing, but before that a WARNING CHAPTER When you fail, you start to teach !


Rishi Kashyap | | EDIT