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Value investing back in favor
By Don Soderquist, Branch Manager - Waddell & Reed Inc. |
Everyone understands the value of a good deal. If you search for high quality at a reasonable price, value investing may have a place in your investment portfolio. As some overvalued sectors of the current stock market have recently deflated, value investing has come back in favor among many investors.
When you consider the allocation of your investment portfolio, it is often helpful to diversify beyond a mix of asset classes, such as stocks, bonds or money market accounts; you also may want to diversify based on style. The two primary styles of stock investing include growth and value, and determining which is appropriate for your investment portfolio can be key to achieving your long-term financial goals.
Taking a look at value In the current environment, when a slowing U.S. economy threatens to negatively impact the stock market, investing in value may help cushion your portfolio from significant declines. With a value investing strategy, investors purchase shares considered under-valued in the current market, with high potential for achieving continued revenues and profits. Typically, value stocks are those of well-established companies that have already survived a risky start-up phase. They often have well-embedded earnings and may be more inclined to pay a dividend to shareholders rather than reinvesting for growth. In addition, value stocks are often steady performers that may be poised for a bounce when the market begins its upturn.
Including value in your portfolio Most portfolios benefit from some application of value investing. If portfolio growth is one of your top investment objectives, growth stocks should still comprise a large percentage of your holdings. However, adding value to the mix may help moderate the performance uncertainty that may be associated with growth investing.
Given today’s market, it may be a good time to reevaluate your investment strategy to include what appear to be currently undervalued companies. Is value investing right for you? Contact your financial advisor to discuss your specific situation. |
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