Learn With ETMarkets: Value vs Growth Investing: Which Strategy is the One for You?
But there is another side to us: the side willing to invest in those exclusive, slightly pricier items, knowing that their value will be appreciated over time.
If you can relate to these two scenarios, you are already familiar with the essence of value and growth investing. Let's simplify it further.
Within this vast market, opportunities arise for both value and growth investing.
It is much like discovering hidden sales or investing in future collectables. The trick is recognising these opportunities when they show up.
But both approaches come with their own set of opportunities and challenges.
You must understand which one is the right fit for you. And it all comes down to understanding what aligns best with your financial goals and risk appetite.
So, let's dive deep, understand each of these approaches, and find the ideal one for you.
Let's begin.
What is Value Investing?
Value investing is similar to being a wise shopper in the stock market.
It is a strategic approach where you look out for stocks that seem on sale, trading at prices lower than what they are genuinely worth. This true worth is the 'intrinsic value of a stock'.
The key idea is to pick stocks that the market has, in a way, overlooked or underestimated.
This results in a margin of safety (the difference between a stock's true or intrinsic value and its current market price).
So, a value investor will always focus on spotting hidden gems in the stock market. It is like discovering that incredible deal during a stock market sale that others might have missed, and you hope it will become more valuable in the future, giving you more than what you paid for.
But the question is how stocks get undervalued, and how should you analyse if the stock is
