Lifestyle and trading – two views, of value ​​and growth

Already in the 17th century, when the first public company appears in Holland, investors were wondering whether to buy or not to buy. And most importantly, why.
Over time, there are many approaches to trading. Two main are a method of cost (value) and growth.

It is hard to discern investors that are guided by different views, since they both follow developments in the economy, various economic data and different financial indicators (profitability, dividends, etc.). How they are different, so that’s how they perceive this information. Price approach says: “This company (currency) has good results in recent years and is sold at a good price, so I buy it. ”

The principle of price approach is to determine of the “true” value of the assets and compare that price with the market price. In addition, you can analyze the performance as price/volume of sales, the dividend yield in recent years, etc. The price trader compares the various assets and defines them as “overrated” or “undervalued” and accordingly adjusts his investment portfolio.
Growth trader looks to the future, tracks the trends in the economy in order to benefit from them. He iss not interested in financial instruments that probably already passed the period of its greatest growth. Under the same terms like price trader, he is looking for the opposite values. For a few dollars, he tries to buy an asset, which in the future will be successful in the market. New products and services of companies that are managed by competent management, with an emphasis on research and investments will probably be the most profitable. Although the dot-com bubble in 2000, is not the best example. Total euphoria caused by the IT boom in Millennium has established in the minds of many investors fantastic expectations about the future profits of “growth” companies.
After an impressive growth of their shares was a sharp fall.

So, which style to choose? The only right answer is not to try to go two ways at the same time. The basis for a successful investment portfolio is its maintenance and management, in accordance with a certain style – on certain rules, of value or growth. Throwing from one approach to another, will lead to the inevitable crash.

Therefore, it is advisable to stick to a certain style of life. Of course this applies to trading too – the creation of a particular style of trading and following it is a prerequisite for success.

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