Ron DeLegge: They say opposites attract, but that's not always true in the stock differences between growth and value stock is proof. I am Ron DeLegge with ETF Guide.
Now both styles of investing are distinctly opposite or different in their approach, despite that they both still have merit. What are the differences between the two? Value investing focuses on shares of the company with solid fundamentals that are priced below those of its peers based upon price earnings ratio, yield and other factors.
Now contrast that with growth stocks, which typically trade at a premium to the rest of the stock market as investors anticipate faster revenue growth. Also growth stocks tend to pay smaller dividends because what companies do is they take that money and then they reinvest their earnings into new projects along with research and development.
Over the past three years value stocks have outperformed growth stocks, yet the performance for both investing styles has been neck and neck over the past five years.
One of the easiest ways to invest in growth stocks is by owning growth oriented industry sectors like technology. Take a look at ticker symbol XLK; that's the Technology Sector SPDR ETF, it tracks the performance of 71 world-class technology companies.
Now in that prestigious group, Tech leaders like Apple, and Google, and Facebook, Oracle, Qualcomm and many others. So, think about this, instead of trying to guess which individual stocks will have the best revenue growth over the next 5 or 10 years, focus your attention on industry sectors with growth characteristics like technology.