There are a number of approaches which can be adopted in making stock market investments in India but it is important to choose the right kind of strategy to achieve desired results. Value investing is one such approach where a stock investor typically looks for stocks undervalued by the market so that they can gain from it when the value of stocks reaches the right level. On the other hand, growth investing involves going for stocks which have performed well in recent past and are likely to continue to perform at a high level.
If the company has good potential for capital appreciation in future, its stocks can be considered as growth stocks and those looking for substantial gains can invest in such stocks. Whereas value stocks are those underperforming currently due to certain transitory reasons but have strong fundamentals which are likely to bring the value of stocks up to their true worth in foreseeable future. Online stock traders also consider the difference that value stocks have lower risk attached to them which is much higher in growth stocks. However, the amount of gains would also differ based on the amount of risk involved.
If the company has good potential for capital appreciation in future, its stocks can be considered as growth stocks and those looking for substantial gains can invest in such stocks. Whereas value stocks are those underperforming currently due to certain transitory reasons but have strong fundamentals which are likely to bring the value of stocks up to their true worth in foreseeable future. Online stock traders also consider the difference that value stocks have lower risk attached to them which is much higher in growth stocks. However, the amount of gains would also differ based on the amount of risk involved.
Online stock traders with a higher risk tolerance can invest in growth stocks as they are also more volatile as compared with value stocks. However, there can be different type of growth stocks in which one might invest. Some of the small-cap stocks can be categorized as growth stocks because they represent a potentially higher growth rate than even some of the blue-chip stocks. However, they are highly volatile which is why they are not recommended greatly.
Usually, growth stocks have higher price-to-earnings ratio (P/E ratio) and price-to-book ratio as compared with value stocks which shows that they are priced higher than the net asset value of the company. It is also possible for stock traders to combine growth and value investing approach to achieve positive results. It is important for any growth investor to consider both the pros and cons of any prospect before making a final decision. Visit our website to open a free trading account www.ashlaronline.com/open-account
Usually, growth stocks have higher price-to-earnings ratio (P/E ratio) and price-to-book ratio as compared with value stocks which shows that they are priced higher than the net asset value of the company. It is also possible for stock traders to combine growth and value investing approach to achieve positive results. It is important for any growth investor to consider both the pros and cons of any prospect before making a final decision. Visit our website to open a free trading account www.ashlaronline.com/open-account