Growth vs Value Stocks
In some cases stocks can also be categorized between growth vs value stocks.
A growth stock is generally a stock that is considered to have earnings that will grow at an above-average
rate with respect to the rest of the market. In other words, growth stocks have a higher probability of
capital appreciation and will likely not pay out dividends.
Usually these companies would rather retain their earnings in hopes for more growth than to pay them out in the form of dividends.
Value stocks are simply stocks that investors consider to be undervalued in the market. In other words, the companies
are trading for less than they are truly worth. There may be any number of ways that investors decide what they
consider to be a value stock, but many investors will look at the price-to-book ration or price /earnings ratio to
determine if a stock may be undervalued.
Another category is income. While this is technically reserved for bonds or other safer investments, you can apply
the income principal to preferred stock. Income means that you are earning
dividends on your investment, the way bonds or preferred stock does. Income investments generally have very little
prospect for capital appreciation the way common stock does.
