Growth v/s Value Investing: Which is Right for You?
Investment is always about choosing between various options, the value and growth Mutual Funds Investing style is one of them, many investors are familiar with these investing styles but do you have the clarity of them? So let’s bring these two into the blog table, and have a clear understanding of which investing is best for you.
Now, Let’s understand the Value and Growth investment in depth which will give you better clarity:
What is the Difference Between Growth and Value Investing
|
Aspect |
Growth Investing |
Value Investing |
|
Price |
Priced above market average |
Priced below their intrinsic value |
|
Earning |
Strong and accelerating earnings, often reinvest into the business. |
Stable earnings with moderate growth, often undervalued |
|
Risk |
High risk and volatility, aiming for rapid expansion |
Lower risk and volatility, Suited for caution investors |
|
Dividends |
Rarely pay dividends as profits are reinvested for growth. |
Tends to offer regular, higher dividend payout |
Definition
Growth Investing: This growth investing mainly focus on those companies that are expected to develop faster than average rate when compared to others. As they aim for the long term capital appreciation, these businesses could choose to reinvest their profit back into growth rather than dividend payment.
Value Investing: Value investing involves the purchase of the best stocks in the market at low prices. When a market recognizes a company's true value, the investor will search for the company that is trading below their real worth. This is how it gains profits from low price stocks.
The Ideology of Growth and Value Investing
1. Growth Investing
Growth investing believes in investing in future growth companies:
- Even if some businesses seem expensive according to the Price-to-earnings ratio PE ratio, investors seek companies that have a great potential to grow their sales, profits, or cash flow. Growth companies may pay higher dividends and might have volatile stocks because they frequently reinvest their income to grow.
- However, this growth method seems interesting because of the potential to generate high returns. These businesses normally appear in sectors like technology, e-commerce, or healthcare.
- Growth investors place a greater value on a company’s potential that has quick future growth rather than low-price companies.
2. Value Investing
This investing process believes in buying affordable companies.
The stable businesses that have consistent profits and little risk, but their stock prices could be low because of temporary market problems. Value stock finds those companies that have a low PE ratio.
As a result of the regular dividend payments made by many of these businesses, investors can make a profit even as they wait for the stock price to increase, such as Protector & Gamble and Coca-Cola.
Growth vs Value Investing: When it will work?
- Growth Investing: Since are more ready for risk when investing in companies with tremendous growth potential, growth investing works best in a bull market and also has strong expanding economies, when businesses can easily reinvent in profits for expansion, and there is excitement about future businesses possibilities, the growth stock perform well.
- Value Investing: When the market is volatile or the economy is uncertain value investing performs extremely well, investors seek out trustworthy companies at lower rates when the market is down and consumers are worried. The stock price often climbs when the market turns around and investors begin to see these companies real worth. Therefore, value investing involves finding these hidden assets and waiting for them until the market realizes their full value.
Let’s start with the best Growth and value fund in India that stands out in your investment portfolio:
Best Growth Fund in India 2024
| Fund Name | Launch Date | AUM (Crore) | Since Inception (%) |
|---|---|---|---|
| Axis Small Cap Fund | 23-11-2013 | 23,395.04 | 26.24% |
| HSBC Small Cap Fund | 12-05-2014 | 16,905.18 | 23.61% |
| Motilal Oswal Mid Cap Fund | 02-02-2014 | 14,445.55 | 25.13% |
| Axis India Manufacturing Fund | 05-12-2023 | 5,193.03 | 43.63% |
| Franklin India Technology Fund | 22-08-1998 | 1,774.27 | 19.82% |
Best Value Fund in India 2024
| Fund Name | Launch Date | AUM (Crores) | Since Inception (%) |
|---|---|---|---|
| ICICI Prudential Value Discovery Fund | 05-08-2004 | 48,805.97 | 21.11% |
| TATA Equity P/E Fund | 05-06-2004 | 8,864.64 | 19.69% |
| BANDHAN Sterling Value Fund | 07-03-2008 | 10,241.88 | 18.1% |
| Kotak EQ Contra Fund | 27-07-2005 | 3,760.4 | 15.44% |
| SBI Contra Fund | 14-07-1999 | 37,845.69 | 17.86% |
End Note
To conclude, whether to invest in a value or growth fund depends on your investing goals, level of risk tolerance, and personal choice, how these stocks do have a major on the status of the market at the moment.
Generally speaking, value equities do well in bear markets and economic downturns. They are generally more trustworthy and could be a better option when things appear unclear. However, when the market is rising and the economy is expanding, growth stocks tend to do better. In a growing economy, they provide the possibility of increased rewards.
It's important to bear in mind that when making an investment for the long term, you can invest with an SIP (Systematic Investment Plan) which will help you to make a disciplined investment and build wealth.
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