The world of investing is vast, and it holds a level of complexity that many beginning investors greatly underestimate. It’s possible to make a fortune through smart investment, but it’s even easier to lose that fortune on one wrong call. Two competing schools of thought in the investing world, growth and value investing, each hold the potential for large returns. However, deciding which of these different kinds of investment is right for you is not always as simple as it may seem. There are benefits and downfalls with either approach to investing, and making the most of your dollar requires careful planning and deep understanding of both.
According to value investing, the best way to make your money work for you is to buy stocks that trade lower than their true value. Investors who subscribe to this mode of thinking seek out stocks that they believe the market has assigned inappropriately low values. Due to the emotional nature of many markets, a single piece of good or bad news can change the price of a given stock to a figure that is less than its actual worth. Value investors read the market carefully to determine which stocks are trading for less than their intrinsic value, and they make a profit by selling when these stocks inflate in price once again.