Growth stocks belong to companies expected to grow revenue and earnings faster than the broader market, often reinvesting profits into expansion rather than paying dividends.
Value stocks are shares that appear cheap relative to fundamentals like earnings or book value, often in more mature industries, and more commonly pay dividends to shareholders.
Growth stocks tend to carry higher valuations relative to current earnings, betting on future performance, which makes them more sensitive to rising interest rates and shifts in investor sentiment.
Value stocks are generally considered more stable, though ‘cheap’ doesn’t always mean undervalued – sometimes a low price reflects real underlying problems with the business.
Many long-term portfolios hold a mix of both styles rather than betting entirely on one, since growth and value stocks have historically taken turns outperforming depending on the broader economic environment.