Growth and Value: What’s the Difference?

While a lot of American investors understand the importance of diversifying across growth and value investments, few are able to accomplish a passing grade on a test of their knowledge of it. While nearly all of American investors understand the need for diversifying across growth and value investments, few are able to achieve a passing grade on a test of their knowledge of the differences between the two, as reported by a new American Century Investments survey. Try out your knowledge with the Growth & Value IQ quiz below:

1. Which best describes a growth stock?

a) Stock that offers guaranteed rate of growth bound to consumer price index.

b) Stock in a company specializing in agriculture, lumber, landscaping, and other organic products.

c) A regular in a business demonstrating better than average profit and earnings gains. d) All of the above.

 

2. Which best describes a value stock?

a) Stock in fast-growing company specializing in high-value, low-cost products, like a deduction retailer.

b) Stock in a company specializing in valuable goods, like precious metals and jewelry.

c) Stock that has a low price-to-book ratio.

d) All of the above.

 

3. Which statement is true?

a) Value stocks outperformed growth stocks between 1927 and 2001.

b) Smaller company value stocks outperformed larger company value stocks between 1927 and 2001.

c) Maintaining a portfolio with a mixture of growth and value stocks generally is regarded a prudent investment approach.

d) All of the above.

 

4. During periods of strong economic expansion, which fund in the main performs better?

a) Growth.

b) Value.

c) Neither.

d) Both.

 

5. By and large, value funds outpaced growth funds in 2000 and 2001.

a) True.

b) False.

 

6. Generally speaking, growth funds outpaced value funds during the 1990s.

a) True.

b) False.

 

7. Which type of fund is more likely to put money into stocks paying a significant dividend?

a) Growth.

b) Value.

c) Neither.

d) Both.

 

8. Higher price-to-earnings ratios normally would be connected with stocks in what sort of mutual fund?

a) Growth.

b) Value.

c) Neither.

d) Both.

 

9. What type of stock is described in this example: “Established baked-goods company with strong balance sheet and good financial experiencing short lived drop in reaction to modifications in senior management.”

a) Growth.

b) Value.

c) Neither.

 

10. What sort of stock is described in this example: “Software company, enjoying steady sales increases, is along the way of rolling out an eagerly anticipated update to a fashionable software application.”

a) Growth.

b) Value.

c) Neither.

Key: 1(c); 2(c); 3(d); 4(a); 5(a); 6(a); 7(b); 8(a); 9(b); 10(a). – NU

 Mail this post

Technorati Tags: Stock Market