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Growth vs. Value: What To Consider In These Two Investing Strategies

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By: Jan Paul C. Ferrer

 

When you invest in a mutual fund or exchange traded fund (ETF), you’ll get information about the particular fund’s investment strategy or style. An investment strategy is simply a set of guiding principles a fund manager uses to choose the particular stock or bonds in which they’ll invest.

Two well-regarded strategies are growth investing and value investing. Each approach has defi nite fi nancial advantages. However, the two investing styles can also complement each other fairly nicely. As a result, one way to diversify your portfolio might be to invest in both growth-and value-based funds, or in funds that combine the two investment styles.

Growth- or value-oriented funds typically include the words “growth” or “value” in their names. Funds that combine the two styles are “blended” funds and may include that term in their names.

Here’s what you need to know about growth and value investing strategies.

What is growth investing?

This strategy primarily focuses on investing money into what are known as “growth” stocks. Often, growth stocks are found in industries such as technology. These equities are:

• Expected to grow at a faster pace than the overall market

• More focused on reinvesting profi t to grow the company instead of paying dividends

• Generally in industry groups most associated with the potential to succeed from the development of new and transformational products or services Growth stocks also tend to be:

• More expensive than peers within an industry group and/or the broader market

• A bit more volatile (risky) than the average stock

What is value investing?

Fund managers or investors who follow this strategy focus on putting money into “value” stocks. Value stocks generally trade at a discount relative to an investor’s interpretation of fair value and may include companies in slower-growing industries. These stocks are:

• Generally those of companies that may not be currently popular among average investors

• May be slow to appreciate in share price, but may pay dividends

• Tend to be in older, more established industries Value stocks also tend to be:

• Less expensive relative to peers within an industry group and/or the broader market

• Associated with companies that may be considered contrarian or turnaround situations

Is one investment strategy better than the other?

Not necessarily. Growth and value stocks—and therefore the investing styles that focuses on them—each tend to take turns leading the market. Growth stocks typically do best when companies are showing strong profi ts and interest rates are falling. On the other hand, value stocks tend to perform better shortly after an economic market goes into recovery mode.

Depending on your particular fi nancial goals, how long you’ll invest your money, and how much risk you’re willing to take on, there may be room for both growth- and value-style funds in your portfolio.

Additional non-MS sources used to research this article: http://www.fi nra.org/investors/types-stock https://www.investopedia.com/articles/investing/011816/investing-growthvs- value-2016.asp

Important Disclosures:

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Jan Paul C. Ferrer is a Financial Advisor in Chicago, IL at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at janpaul.ferrer@ morganstanley.com or by telephone at 312 312-419-3535. https://advisor. morganstanley.com/janpaul. ferrer

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual fi nancial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Growth investing does not guarantee a profi t or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with more modest growth expectations.

Value investing involves the risk that the market may not recognize that securities are undervalued and they may not appreciate as anticipated.

Investors should carefully consider the investment objectives, risks, charges and expenses of a Mutual Fund and an Exchange Traded Fund (ETF) before investing. The prospectus contains this and other information about the Mutual Fund and ETF. To obtain a prospectus, contact your Financial Advisor or visit the Mutual Fund and ETF company’s website. Please read the prospectus carefully before investing.

Jan Paul C. Ferrer.may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where [he/she] is registered or excluded or exempted from registration, https://advisor.morganstanley. com/janpaul.ferrer

© 2021 Morgan Stanley Smith Barney LLC. Member SIPC. CRC# 3940765 12/2021

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