What type of investments? Growth/Value?

Today I'm going to talk about what type of investor I try to be. Some people are value investors, fully focused on low PE, high dividend stocks or turnarounds. This can be a good defensive strategy if applied to some large cap companies with proven business model as a low valuation and high dividend can act as a cushion for these stocks. That is why during the times of recessions or market declines, these stocks tend to perform slightly better than the rest. Some people are growth investors, fully focused on stocks with high net income growth or revenue growth. This is an aggressive strategy but also one that can help choose the multi-baggers over time.

What type of an investor am I? Investing only in value stocks means missing out on some good growth stocks and fully investing on growth stocks can be risky at times as companies mature and their multiples contract quickly. A good combination of growth and value stocks can be a good strategy for your portfolio. Growth stocks will boost the returns and value stocks would provide some cushion. To be a prudent investor, even when searching for growth stocks one has to find value or cheapness to avoid paying too much.

What percentage to invest in growth and value? It is really a personal choice again. I started out with a very defensive investment strategy focusing mostly on dividend paying stocks. I have come to learn that while this provides a good cushion, it will give me fewer multi-baggers over the years. Not that multi-baggers is the criteria for investing, but having those few trump cards can really boost the portfolio. So, I have shifted my focus to a mixed style, now picking some growth stocks with a long term story as well. I plan to put 50-75% in value stocks and 25-50% in growth stocks depending on the market valuations.