Growth vs. Value Investing
Paying up for fast earners versus buying out-of-favor bargains.
What is Growth vs. Value Investing?
Growth investors buy companies with rapid earnings growth, typically high P/E and P/B ratios and low or no dividends. Value investors buy companies trading cheaply relative to earnings, book value, or dividends - often out of favor, with higher dividend yields. Value investing is frequently contrarian.
Growth vs. Value Investing: a worked example
A software firm at 50x earnings is a growth holding; a bank at 9x earnings and 0.9x book is a value holding.
More terms in Clients, Strategy & Tax
Sole Proprietorship
A business owned by one person with no legal separation from the owner.
General Partnership
Co-owners share management and unlimited liability; income passes through.
Limited Liability Company (LLC)
Limited liability for owners with pass-through taxation by default.
C Corporation
A separate taxpayer - profits taxed at the corporate level, then again as dividends.
S Corporation
A corporation that passes income through to shareholders, avoiding double tax.
Trust & Estate Accounts
Accounts run by a fiduciary - a trustee or an executor - under a governing document.
Foundations & Charities
Tax-exempt organizations investing for a mission, often in perpetuity.
Client Profile & Data Gathering
The financial and nonfinancial facts every recommendation must rest on.