Bill Losey's National Retirement Planning Month - Retirement Tip #77

The Growth versus Value Debate

Investors and money managers who seek out growth stocks are generally looking for quality companies with higher than average earnings growth rates, regardless of what the current market valuation of the stock is.

By comparison, investors and money managers who advocate value investing typically buy shares of stock in companies that have been beaten down in price because they are going through a period of adversity. Value investing usually calls for selling these shares after they have risen in price as a result of the underlying company having recovered from its difficulty.

Growth stocks can fall in share price and become value stocks. Value stocks can rise in price and become growth stocks. It is a never ending cycle of ups and downs. Money mangers and investors alike have their own methodology for determining if a stock is value or growth. In fact, two different money managers may classify the same stock as both growth and value.

As for what style is better, there are reams of research which can illustrate what strategy has achieved the highest rate of return. What you’ll find is that both styles come in and out of favor and most money managers can’t predict with any certainty which will outperform the other.