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Growth, income and value stocks


Samir 1
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Hi Samir, thanks for coming here. 

These three types of stocks are mostly different in the return that they yield. Let’s look at each category to see what are their key characteristics.

The growth stocks keep investors happy as their growth rate is very high. This group of stocks is usually growing at a faster rate than the overall stock market and yielding higher rates of return. Therefore, this is considered to be an aggressive strategy that is mainly focused on the growth rate, which is then reinvested in the business to further accelerate the growth rate.

For these reasons, the growth stocks are usually of those new innovative companies, such as those in the tech sector.

The second group is the income stocks. As the name itself says, the income stocks focused on generating income for its investors, mostly through dividends. This way, investors tend to focus on companies that regularly pay dividends. As such, this income is usually budgeted as the chance of the company X paying dividends is extremely high. 

On the other hand, these companies may not have a high growth rate. The most common income stocks are those of well-established, profitable companies e.g. Coca Cola.

Value stocks are the least common of the three categories of stocks. The value stocks are mostly identified by analysts as shares of companies that are likely undervalued by the market and likely to outperform the market in the mid-term. 

These stocks are closely tied to the concept of fundamental analysis as you need to have a strong understanding of financial analysis in order to analyze the company’s financial state to identify undervalued stocks. 

All in all, you should choose which type of investor you are. If you are looking for an aggressive and more risky investing strategy, then you should go for growth stocks, unlike the other two that are more connected to well-established companies. 


 

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