What kind of investment you navigate?

For many investors the difference between investing in stocks of " growth " (growth investing) and investing in "value " (value investing) may initially be confusing , but there are clear features that help us to distinguish them . And while each of the two types of investment has its unique characteristics and often have a different result at different economic cycles , many advisers encourage investors to use both strategies to reduce volatility in a portfolio. The main difference between investing in shares of " growth " and investing in "value" associated with the type of company , its profit expectations for growth and other financial parameters used for evaluation. This type of information gives investors an important clue as to whether a share is overvalued or undervalued and its possible future performance. There are some basic ways to determine if one shares can be characterized as such growth or value . Many reports that are publicly available , provide information on whether shares or mutual fund is oriented towards growth or value , so investors do not have necessarily to pick through all quantitative analyzes. Growth stocks versus value stocks Growth : Earnings are expected to grow at a higher rate than the average for the industry or the overall market. Value: Lower than average price / book value and price / yield and / or high dividend income . Two common parameters for evaluating There are two main parameters that users could use to determine the type of shares they own : Price / earnings per share (P / E) and price / book value (P / B). P / E ratio is calculated by dividing the share price to earnings per share (EPS). The ratio P / B is calculated by dividing the share price of the book value. These figures can be found in the quotation of each share in specialized publications online . Many times these ratios are calculated and investors should not do it themselves . Calculate the P / E PE = This share price ÷ profit acacia price / book value , or P / B: P / B = current share price ÷ its accounting value These ratios help to determine whether a share is undervalued or overvalued . The higher ratios are P / E and P / B, compared with those of other shares , the more growth-oriented is the share , and the lower the P / E and P / B, more oriented value share. Expensive stocks are expected to justify their possession growth stocks is a company whose earnings are expected to grow at above average growth for the industry or the general market. These companies are growing at a faster pace than its competitors , and this trend can make them attractive to investors , despite the fact that the price may seem relatively high. Such shares may also be companies of barzorazivashta industry or sector and are characterized by rapid growth of market share or company size . Typical examples are Microsoft and dot-com companies of the late 90s of last century. Finding share bargains contrast investment in growth , investors seeking value selected stocks with lower than average ratio P / E or E / P and / or high dividend yields . Investors seeking value buy stocks because they are undervalued or cost more than the price for which they sell at the moment. To determine whether a share is undervalued , investors see the fundamental characteristics of a company , including the ratios P / E and P / B, and the management of the company , its health, and current and expected future cash flows. When something about these fundamental characteristics suggesting that the shares are sold at a lower price than the cost , then it is believed that the stock is undervalued . Which style is better for the investor ? In assessing the nature of growth and value investors need to look not only presentation of one share , but its volatility in the long run . Historically, studies have shown that value stocks perform better than growth in most periods of time, especially in times of crisis markets . For the investor who wants a long-term performance and reduced volatility , the combination of value and growth is a reasonable choice in a well diversified portfolio. Trying to guess which of the two types will be respectively will be in vogue in a certain period of time , it is difficult , if not impossible. The fact that one type of investment usually yields better results than the other, supports the view that a good portfolio should participate both .