Growth vs. Value? One of the longest-running dichotomies in investing is the ongoing tug of war between growth stocks and value stocks. Growth stocks are generally seen as companies that are growing consistently and, typically, at above average rates. Value stocks, on the other hand, are companies whose progress is less consistent and often relatively slow. At first glance, one wonders why investors would look beyond growth stocks to fill out their portfolios, but there’s more to the task of portfolio construction than just picking market stars such as Amazon, Apple, Facebook, and the like. Here’s the hitch. Over time, most growth stocks will turn in better returns than most value stocks. The key word here is most. A portfolio of diversified growth stocks will usually be selling at significantly higher valuations (price-earnings ratios) than a portfolio of diversified value stocks. Why? Because more rapid and more consistent growth rates give investors greater con
Investment and economic observations by N. Russell Wayne, CFP, MBA. Mr. Wayne is the president of Sound Asset Management, inc. and former Managing Editor of The Value Line Investment Survey.