Growth stocks and value stocks
This distinction reflects two fundamentally different investing philosophies.
Growth stocks
Growth stocks tend to have higher risk levels, but the potential returns can be extremely attractive. Successful growth stocks have businesses that tap into strong and rising demand among customers, especially in connection with longer-term trends throughout society that support the use of their products and services.
Competition can be fierce, though, and if rivals disrupt a growth stock's business, it can fall from favor quickly. Sometimes, even just a growth slowdown is enough to send prices sharply lower, as investors fear that long-term growth potential is waning.
Value stocks
Value stocks, on the other hand, are seen as being more conservative investments. They're often mature, well-known companies that have already grown into industry leaders and don't have as much room left to expand further.
Yet, with reliable business models that have stood the test of time, they can be good choices for those seeking more price stability while still getting some of the positives of exposure to stocks.
For newer investors or those without much capital to spend in their investment journey, value stocks can have a larger barrier to entry in terms of share price. For example, consider Apple (AAPL -0.14%) as one of the value stocks. It has traded in a range of $220-$280 per share for a year straight.
Growth or value? Neither is inherently better. Many investors hold both, using growth stocks for long-term appreciation and value stocks for stability.
IPO stocks
IPO stocks are stocks of companies that have recently gone public through an initial public offering (IPO). They often generate a lot of excitement among investors looking to get in on the ground floor of a promising business concept. But they can also be volatile, especially when there's disagreement within the investment community about their prospects for growth and profit.
A stock generally retains its status as an IPO stock for at least a year and for as long as two to four years after it becomes public.
