"The Difference Between Value Investing and Growth Investing"
⭕Value investing pursues low prices. Value investors usually examine financial indicators such as earnings, cash flow, dividends, hard assets and enterprise value, and emphasize buying at low prices on this basis. The primary goal of a value investor is to determine a company's current value and to buy its securities when prices are low enough.
⭕Growth investing is somewhere between boring value investing and impulsive momentum investing.
The goal is to identify businesses with bright prospects. By definition, it focuses on the potential of a business rather than its current attributes.
The differences between the two major investing schools can be boiled down to this!
1. Value investors buy stocks believing that current value is higher than current price (even if their intrinsic value indicates limited future growth)
2. Growth investors buy stocks (even if their current value is lower than their current price) because they believe that rapid growth in future value will be enough to cause a significant price increase.
So it seems to me that the real choice is not between value and growth, but between current value and future value. Growth investing bets on company performance that may or may not be realized in the future, while value investing is mainly based on analyzing the company's current value.
