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Growth vs Value Investing: Which is Smarter?


28 April 2022

Growth and Value are two different yet fundamental approaches or styles of stock investing. Two key influencers in this space include Warren Buffet, widely considered to be the world’s greatest value investor, and Cathie Wood on the opposite end, is a famed growth investor. So, what makes these styles so different? In a nutshell, growth investors are seeking companies that are expected to grow faster i.e. revenue growth, while value investors are focused on companies with a share price that don’t reflect their true value – buying at a discount.

Here are some key points of both styles:

Value Investing

“Price is what you pay. Value is what you get” – Warren Buffett

Growth Investing

Growth or Value…. Who’s the Winner?

The battle between Growth and Value has been ongoing for years, with each style offering its unique advantage.  We have witnessed periods when value has beaten growth significantly and for extended periods and vice versa. So, picking one style over the other may not be a sound strategy, because performance drivers are period-specific.

Here is an example:

As displayed on the chart there have been different periods of rotation between value and growth over the past year. But we are now witnessing a rotation from growth to value, and this could mainly be due to the Fed’s more hawkish stance on interest rates along with higher rates of inflation.

Different periods of rotation between value and growth over the past year

As displayed from the breakdown, the technology sector accounts nearly for 44% of the ETF as opposed to the Value ETF where Health care and Financials both account for roughly 31%.

Technology sector accounts nearly for 44% of the ETF as opposed to the Value ETF

The Bottom Line

Every investor or trader has varying risk tolerance, investment goal, and time horizon. It Is important to highlight that the performance of either growth or value will depend largely on the market cycle we are in. However, if investors are seeking a more balanced style with high rewards and less risk, then a balanced approach of both growth and value stock would be optimal.

Here at MultiBank Group, we equip traders and investors with the right tools and knowledge for them to succeed. We always aim to take one step further for our clients to succeed in the financial markets. MultiBank Group offers clients 20,000+ CFDs across six asset classes including Forex, Indices, Shares, Commodities, Cryptocurrencies, and Metals. Trade with the World’s #1 Online Financial Derivatives Broker.

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