Growth Stocks and Value Stocks

Growth Stocks refers to the shares of high-quality companies whose earnings are expected to grow at a rate higher than the average in the market. Valuations of these shares measured by price-to-earnings (P/E) ratio tend to be rich in uncertain times because of better earnings visibility.

Value Stocks are different from Growth Stocks. Investors buy the value stocks hoping they will outperform when the broader market rallies. Value stocks usually have low P/E ratios when the outlook is hazy as investors remain unconvinced about earnings prospects of such companies.