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Kindly explain the difference between a growth fund and a value fund.
-M.V. Rao
Growth and Value are two basic approaches of investing in stocks. Growth investing involves investing in stocks which carry a high level of optimism and are expected to grow faster than others. Such stocks command a higher price. On the other hand, value investing encompasses investing in stocks which are undervalued and have a potential for capital appreciation, but have not been in the limelight of the investing community.
The Value Research Style Box is a nine-box matrix that graphically displays whether a fund follows the growth style or the value style of investing. A fund that follows the growth style will appear on the left column of the matrix while a fund that follows the value style will appear on the right column. If a fund follows a combination of growth and value style, it features in the middle column which indicates a ‘Blend’ style.
The style box also depicts the market capitalization of a fund’s portfolio with large-cap featuring in the top most row of the matrix, mid-cap in the middle row and small-cap in the last row.
This article was originally published on February 10, 2009.
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