Author’s note: I want to thank the staff of the VDT for their kindness, support, and editorial help. During these difficult times, this column has strayed into more “life” than “the business of life”. For my faithful readers, this note is explanation and alert that similar opinion pieces will seek publication in the op-ed section. That said, let’s get back to business.

There are two types of investors, and the way they buy stocks has historically shaped the entire market into two buckets. There are value investors, and growth investors, and right now, growth investors are making the biggest moves.

Which is typical for market recoveries. But it’s often frustrating.

Because the category “growth” indicates investments that are valued based on their future potential to grow (regardless of the growth of the underlying asset).[1]

The “value” category focuses on the value of the underlying asset, and investors buy value stocks based on the fundamentals—the profitability of the company, the stock’s dividends, etc.[2]

The frustration comes typically on the short term, when you buy a company that fundamentally shows a lot of value, but the stock doesn’t perform. 

Whether or not the stock has value, sometimes, is irrelevant to the stock’s actual performance.[3]

So one of the most frustrating things happening right now is value investors are buying stocks that are “worth” it (trading at a big discount) but they aren’t budging. Fears of the coronavirus are keeping them suppressed.

Meanwhile, growth investors are having their day in the sun, buying stocks with valuations that make you scratch your head, and making big returns.[4]

There are no guarantees in the stock market, and general patterns are impossible to predict perfectly, but typically, growth stocks lead to more bubbles, while value stocks lead to slower, steadier growth over the long term.[5]

So when people ask what kind of stocks to buy, growth or value, there is no one answer. It’s like asking what’s better, a roller coaster or a cruise ship.

If you are wanting to invest in a company you believe in, at a price you agree with, you are probably shopping for a cruise ship. If you are looking for return on your investment, regardless where that comes from, then buckle up.

Right now, we have plenty to worry about. Your investment portfolio shouldn’t be on that list, if you have a process and a trusted partner.

The answer to growth in the stock market isn’t dependent on finding the “next big thing” that will explode into the market. It’s the same it’s always been: finding quality companies and investing in them at the value you can feel good about.

And if you see your friends putting it all on black and winning big, imagine the stress of losing big, not just with your Vegas money, but with your retirement funds. 

Looking at the big picture, we have always historically recovered from market downturns.[6]

Today is just another day.

 [1] https://www.investopedia.com/terms/g/growthstock.asp

[2] https://www.investopedia.com/value-stocks-4689740

[3] https://www.investopedia.com/articles/fundamental-analysis/09/five-must-have-metrics-value-investors.asp

[4] https://www.forbes.com/sites/sergeiklebnikov/2020/06/23/tesla-is-overvalued-investors-are-treating-it-too-much-like-a-tech-company-says-morgan-stanley/#32028d3b6c74

[5] https://www.marketwatch.com/story/stock-investors-in-2020-should-be-careful-about-partying-like-its-1999-2020-01-13

[6] https://www.forbes.com/sites/kristinmckenna/2020/04/03/what-happens-to-the-stock-market-after-a-recession/#74c77e902afb