Becoming a Growth Investor and Value Investor
So you want to make money in the stock market. To do that you have to have a method. The only way to make money is to have a plan.
There are two ways two make money in the stock market everyone talks about, but you will be a lot better off if you combine the two of them. I'm talking about growth investing and value investing here. You know buy when it goes up or buy cheap and sell high later. Combine both.
Growth investors invest when they see the potential for big earnings growth in a company and don't worry how about high or low a stock is valued at. All they want is to see earnings growing. William O'Neill of Investor's Business Daily is the most popular growth investor, because he wrote the book How to Make Money in Stocks that shows you how to be a growth investor. He buys stocks in companies that have quarterly earnings growth of 20% or more. If the company has a new product coming out he likes it even better. He also only buys stocks that are acting stronger than other stocks in its group, although many other growth investors do not look for this.
In bull markets it is the growth stocks that go up the most, because everyone likes things that go up and they go up the most. But there are some scary times in the growth stocks. If the earnings growth stops then the stock can fall very hard because everyone thinks everything will grow forever.
This always happens at some point with growth companies, because nothing can grow forever. Even Wal-Mart had its growth slowdown. When that happens the stock almost always stops going up and if the end of the growth takes people by surprise it can fall very hard.
Growth stocks tend to have big valuations, because investors are willing to pay big prices to get the growth. That is why they can drop in a big way when bad news comes out or earnings growth stops. Investors need to also have some basic stock trading strategies in place to know when to take profits or sell.
The opposite of growth stock investing is value investing. The most famous value investors are Warren Buffet and his mentor Benjamin Graham. Value investors look for companies with low debt, a high book value, a dividend yield, a high sales-to-price ratio, and a low price-to-earnings ratio, among other things.
When the market has a correction then value investors can find the bargains they are looking for. The correction can happen due to a slow economy or just plain scared investors, but there is no reason to be fearful forever and that is how value investors come in and buy stocks when they are on sale and then sell them later.
Sometimes a value investor has to wait a long time after buying a stock to see it go up, because the public stays scared and doesn't see the value in the stock. This can even happen in whole markets. Gold and commodities stayed at low prices until only a few years ago for example.
Value investing strategies usually do not do as well as growth strategies in a bull market, because growth stocks go up more. But they are the best way to get in cheap and sell at a big gain. It can sometimes just take more time than most people can wait for. - 23196
There are two ways two make money in the stock market everyone talks about, but you will be a lot better off if you combine the two of them. I'm talking about growth investing and value investing here. You know buy when it goes up or buy cheap and sell high later. Combine both.
Growth investors invest when they see the potential for big earnings growth in a company and don't worry how about high or low a stock is valued at. All they want is to see earnings growing. William O'Neill of Investor's Business Daily is the most popular growth investor, because he wrote the book How to Make Money in Stocks that shows you how to be a growth investor. He buys stocks in companies that have quarterly earnings growth of 20% or more. If the company has a new product coming out he likes it even better. He also only buys stocks that are acting stronger than other stocks in its group, although many other growth investors do not look for this.
In bull markets it is the growth stocks that go up the most, because everyone likes things that go up and they go up the most. But there are some scary times in the growth stocks. If the earnings growth stops then the stock can fall very hard because everyone thinks everything will grow forever.
This always happens at some point with growth companies, because nothing can grow forever. Even Wal-Mart had its growth slowdown. When that happens the stock almost always stops going up and if the end of the growth takes people by surprise it can fall very hard.
Growth stocks tend to have big valuations, because investors are willing to pay big prices to get the growth. That is why they can drop in a big way when bad news comes out or earnings growth stops. Investors need to also have some basic stock trading strategies in place to know when to take profits or sell.
The opposite of growth stock investing is value investing. The most famous value investors are Warren Buffet and his mentor Benjamin Graham. Value investors look for companies with low debt, a high book value, a dividend yield, a high sales-to-price ratio, and a low price-to-earnings ratio, among other things.
When the market has a correction then value investors can find the bargains they are looking for. The correction can happen due to a slow economy or just plain scared investors, but there is no reason to be fearful forever and that is how value investors come in and buy stocks when they are on sale and then sell them later.
Sometimes a value investor has to wait a long time after buying a stock to see it go up, because the public stays scared and doesn't see the value in the stock. This can even happen in whole markets. Gold and commodities stayed at low prices until only a few years ago for example.
Value investing strategies usually do not do as well as growth strategies in a bull market, because growth stocks go up more. But they are the best way to get in cheap and sell at a big gain. It can sometimes just take more time than most people can wait for. - 23196
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posted by X - Men @ 12:50 AM
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