Strategy 101
Growth vs Value Investing: What's the Difference?
How growth and value investing differ, the risks of each, and why many investors use both.
Beginner investing lessons and fake-money practice from the maker of Quoliv.
Quick answer
Growth investing focuses on companies expected to grow faster than average, even if their shares look expensive today. Value investing looks for companies whose shares seem cheap compared with what the business is worth. The two styles tend to take turns doing better, which is why many investors hold some of each.
What you’ll learn
- Growth stocks: fast-growing companies that usually reinvest profits.
- Value stocks: companies priced below what investors think they're worth.
- Growth stocks often swing more because of high expectations.
- Value stocks can stay cheap for a long time.
- Broad index funds hold both styles.
This explanation is part of our Long-Term Investing lessons path, where you can explore the idea in short lessons and quizzes.
Side by side
| Growth | Value | |
|---|---|---|
| Typical company | Young, expanding fast | Mature, steady, or out of favor |
| P/E ratio | Often high | Often low |
| Dividends | Usually small or none | More common |
| Main risk | Growth doesn't materialize | Stock stays cheap for years |
| Price swings | Usually bigger | Usually smaller |
How growth investors think
Growth investors pay up today for earnings they expect tomorrow. If the company delivers, the stock can rise a lot. If growth slows, a high price can fall hard because expectations were baked in.
How value investors think
Value investors use measures like the P/E ratio to find companies that look underpriced. It takes patience: the market can take years to agree, and sometimes a cheap stock is cheap for a good reason.
Do you have to choose?
No. The styles tend to alternate in performance, so many investors blend them. A broad index fund already includes both.
Understand both styles before you commit to one.
Sources and methodology
This guide was written for education using the primary sources below. It does not evaluate your finances or recommend an investment. Read our editorial policy.