What is Growth Investing?

Growth investing is when someone invests in a company whose earnings are 20% year after year. Examples of this would be Cisco, Microsoft, and Paychex. They each had huge earning reports that beat the previous year. These stocks usually have a product that users want and has a superior profit margin.

What is a Value Investor?

A value investor is one who tries to find stocks that are priced low but have a great balance sheet and assets in their company. Basically - a company who someone thinks is undervalued. The value investor tends to like finding stocks with a  low P/E ratio or a low price to book value.

Hmm…

Now you might think that P/E ratios are everything a stock is about and that value investing is the best idea on the planet…this isn’t true.  The stocks mentioned above in growth investing had P/E ratios of over 31; that is 31 times earnings! If you were a value investor you would have not made the critical buys of the great companies, such as Microsoft in its prime years. Also, you must remember, unless you are Warren Buffet, you will not get special information on investing. Warren Buffet has teams and teams of auditors who can go through companies’ books. Just beacuase he can do it and be successful does not mean that you will be as successful. Mr. Buffet has many more tools than you will ever have, unless you plan to one day be the oracle of your town.