Value stocks and growth stocks
Value stocks and growth stocks are two different investment strategies that investors use to try and earn returns in the stock market.
Value stocks are typically companies that are undervalued by the market, meaning they have a lower price-to-earnings ratio (P/E) and price-to-book ratio (P/B) than the overall market. These stocks are often in mature industries, have stable earnings, and pay dividends.
Growth stocks are typically companies that are growing faster than the overall market, have higher P/E and P/B ratios, and reinvest their earnings back into the business rather than paying dividends. These stocks are often in emerging industries or have a disruptive business model.
Ultimately, the best strategy for an investor depends on their investment goals, risk tolerance, and time horizon. Diversification across both value and growth stocks may be a prudent approach for many investors.