Growth stocks:
future oriented outperform in future. Fastest growing stocks than current market.
They allocate more money in business expansion.
sectors like technology, alternative energy (solar), biotech,(medical industry).
Pros: huge return on investment (in case of innovative business or efficient management) housing com.
Cons: many smalleer unstable companies
Amzn pe ratio 83(growth companies pe ratio tend to be high).
15%+ per year. While index 5-7% year.
Value stocks:
stock price trading at lower than instrinic value /book value.
Long-term strategy:
A well run company, sudden drop in share price due to ceo misbehavior, ex: ceo caught as scandal etc.
Pro: buying at lower than actual value (10-50% gain on buying remaining after normal or hike in price)
cons: undervalued company may not regain the actual rank. Due to loss, loss of interest of owner.
Price may go down further, ex: berkshire Hathway early textile.
Income stocks/dividend stocks:
also known as dividend stocks.
Fixed income every year.
Dividend companies are matured , no business expansion just distributes profit among stock holders.
Dividend Yield = (Dividend per Share)/(Price per Share)*100
Stock price 1000
dividend 100
dividend yield = 10%. But dividend yields announce on facevalue of a share.
To get more income than guaranteed portfolios like than fixed deposit, debuntures, treasury bills,
Values can down when interest rates arises.
growth stock high pe ratio & low pb ratio
Price to Book Ratio = (Price per Share)/( Book Value per Share)
Price to Earnings Ratio= (Price Per Share)/( Earnings Per Share)
Value stocks give dividends, while growth stocks don’t distribute profit as dividends, instead they use for growth.
Money making strategies:
Growth stock higher growth potentials & downside risk towards immature company.
Value stocks: buying at lower than actual value, getting profit once it reaches its position, downside may not reach their position.
income stocks: better returns than traditional risk free investments like FD, saving schemes,. Downside may lower income or dividend yield regular irregular dividend payouts.