What's the difference between the two styles? In picking growth stocks, investors seek popular companies whose profits are growing quickly and whose shares are moving up smartly in price. Buying a growth stock is like jumping onto a moving train -- it can be dangerous, especially if the train comes to a screeching halt as you make your leap.
One measure is the price-to-earnings (P/E) ratio, which denotes how many dollars the market is willing to pay for a dollar of a company's profits. Another is the price-to-book value (P/B) ratio, which you get by dividing a stock's price per share by its book value (or net worth on the balance sheet) per share. Growth stocks have high P/Es and P/Bs; value stocks have low ones.
How badly has growth been beating value? Look at two funds run by Vanguard: Index Growth and Index Value (both: 1-800-662-7447). The growth fund owns the stocks in the Standard & Poor's 500-stock index that have higher than average P/B ratios. The value fund owns the others.
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