Should I Trade My Growth Stocks for Value Stocks?
Among the different styles of investing, growth investing and value investing are two of the most popular approaches. Growth-oriented investors seek to maximize capital appreciation by investing in companies that are expected to grow their revenues, or their earnings, at a faster rate than most other companies within the same industry.
By contrast, value investors look for companies that are trading below their intrinsic value, as computed by such financial metrics as the price-to-earnings (PE) ratio. There are good arguments for both of these styles of investing, and preference for one over the other often comes down to each investor's goals, risk tolerance, and investing horizon.
However, growth stocks are often perceived as being riskier and more volatile, in part because they typically carry much richer valuation metrics, but also because many growth-oriented companies aren't consistently profitable. And given the recent market sell-off caused by the COVID-19 pandemic -- and the dire economic consequences that will almost certainly ensue -- it is worth wondering whether trading your growth stocks for value stocks right now is a good idea.
Source Fool.com
