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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, May 25, 2006

Growth versus Value

Growth stocks and value stocks differ in many ways and investing in both can be a method of further diversifying your portfolio. Growth companies typically take profits and put them back in the company. They also often have high P/E ratios. They are companies that are making an effort to grow and be more prosporous. Now value stocks are not the opposite of growth, but they are different. They have a lower P/E ratio and often give out dividends to investors. These characteristics also go for mutual funds. And there is even mutual funds that are Blends which "blend" growth and value stocks into their portfolio.

So because these types of investments differ you can diversify your portfolio further. As your portfolio growths you can focus on these different categories of stocks and mutual funds to make your investments have a lower risk and better return.


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