investing guide

What Is The Difference Between Income, Value, And Growth Stocks

growth stocks

So what is the difference between income, value, and growth stocks?

There are basically three different ways to classify stocks.

(1.) Income Stocks - These are stocks that in general pay dividends and are also considered to be less volatile than other stocks. People close to retirement sometimes buy these types of stocks as additional income because of the dividends they pay.

(2.) Value Stocks - These stocks are considered to be from profitable companies that are selling at a reasonable price compared to their true worth. These stocks tend to be in less thrilling companies such as banks and insurance companies. People who invest in these companies really need to understand the fundamentals of a company to understand their true value.

(3.) Growth Stocks - These are the wild west of the stock market. They tend to be very volatile, but offer the chance for big gains for the short term investor. These stocks usually do NOT pay any dividends and are often related to the high-tech industries.