What I am doing right now is learning the stock market lingo. And it is another language, and there is a lot of it! I am feeling a bit overwhelmed. I am thinking that organizing it in writing should help, and also provide an indexed series of references to refer back to later on. I’ll pull my explanations from a number of sources, and provide links as well. Often I will be referring to an excellent finance read for the beginning investor: “The Neatest Little Guide to Stock Market Investing” by Jason Kelley.
The terms for today are Growth Investing vs Value Investing. Referred to as “the great divide” and “opposites sides of the street”, these two ways of evaluating stocks are pretty polar, and probably just a little bit old news, as now the philosophy is to incorporate a little of both styles. But understanding them is essential.
Here’s a nice summary from Wikipedia. Don’t let the terms scare you. You can look them up by going to the Wikipedia link or googling them, or in the investment dictionary at the end of this page (scroll to bottom). I will also be covering them in future posts.

Below is taken from Value vs Growth Investing at Wikipedia, the free encyclopedia:

Performance of Value and Growth styles
For several years at a time, quite often one of the style of investing will
perform better than the other. In the late 1990s growth style stocks
significantly outperformed value style stocks. However, since 2000 value stocks have outperformed growth. Some people believe the performance of the two styles goes in a cycle, even viewing them as distinct asset classes, with a view to make strategic switches.

Warren Buffett on Value vs. Growth
Billionaire investor Warren Buffett has been highly critical of these styles.
He has commented that investment ratios such as Price/earnings ratio are no guide to value. In an excerpt from his 2000 letter to shareholders he wrote the following: Market commentators and investment managers who glibly refer to growth and value styles as contrasting approaches to investment are displaying their ignorance, not their sophistication.
This is because Buffett believes the most important ratio is price/intrinsic
value, and intrinsic value incorporates the growth rate of the business. However, this is a less practical measure than price/earnings since intrinsic value depends on the estimate of future cash flows, and can therefore be highly subjective.

Tune in this week for the next investing installment: Fundamental vs Technical Analysis

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