Growth versus Value investing

Many people have asked me as a financial adviser, what the difference between growth and value investing is.

While these are both very complex and wide-ranging discussions, and really have no simple answer, I think the easiest way to explain the difference is that a growth investor will focus on the growth in the value of a share price over time, and a value investor will look for consistent and high annual dividend returns over time.

This explanation is fairly basic, as there are many different styles within these strategies.  (Click this link for a more in-depth and detailed discussion on these topics)

The debate as to which style is the best has raged on for years and will continue as there seems to be no conclusive answer.  Most value investors will point to the statistics which suggest that over any reasonable period of time, these strategies have overwhelmingly outclassed growth strategies.

Warren Buffett, considered by many as the greatest investment mind, and the greatest investor of our time, has been claimed by both sides of the argument, but appears to be more in favour of an intricate combination of both of these strategies.

So, who is right?  Growth or Value?

In my experience, both of these options should be focused on in order to maximise investment returns.  If you have a combination of both good, long-term annual dividend income and capital growth in the share price over a sustained period of time, say 10 years, you have hit the jackpot and will be in a great position to create long-term, real, sustainable wealth.

 

investing, growth