Value investing is the ownership of assets at bargain prices. At the core is the notion that today’s price is below the future value. In practice, we are happy to pay a low price for a stock today that we expect is going to be worth more in the future.

Despite sharing the same ultimate target of capital appreciation with Growth investors, Value and Growth investors see the world differently. Growth investors seek out companies that feature growth trajectories above that of the market. Since other market participants have similarly high expectations, Growth valuations (e.g. P/E ratios) tend to be above average, forcing investors to pay “expensive” relative prices for their shares. To see prices rise, Growth stocks must grow their businesses and meet often-lofty targets, leaving little margin for error.

Download the PDF to read more