Equity portfolio managers are often split into two groups: growth and value. At a high level, these labels refer to the philosophy each follows when selecting investments. While both groups seek to maximize returns, they do so in their own unique way. This article will review the general features of each style of investing.

 

Value investing

 

What it is: Value investors are often thought of as bargain hunters. Their strategy is to invest in stocks that are trading below their actual worth – profiting once the market corrects this gap.

Mantra: Buy quality businesses at discounted prices.

 

Growth investing

 

What it is: Growth investors prefer the high-flying segments of the market. They seek out companies that are expected to enjoy significant growth – relative to their industry or broader market. The profit comes as the company achieves this vision.

Mantra: Pay a premium for businesses based on expectations for high levels of future profitability.

It’s important to remember that there is no fixed definition of what makes a growth or value stock. In many ways, value and growth are in the eye of the investor.

 

Where to go from here? It all comes back to diversification…

 

No matter how you invest, it’s important to remember that markets can shift quickly. The cyclical nature of markets means different styles will lead at different times. Taking a diversified approach– with exposure to various corners of the market -- can provide you with a smoother investment experience than one that centers heavily on any particular style.