Equity characteristics style. Investment style is a philosophy or a method that directs an investors investment selection now assets within a style typically share common characteristics and styles can be seen both on equities and in fixed income. In fixed income the major styles that we generally see are duration or how sensitive bonds are to interest rates and also credit quality ranging from high yield or junk bonds to triple a rated government security inequities size of the company is a major investment characteristic use by investors along with are they growth companies or more value oriented Investments? Let's look deeper into the differences between growth and value. Now, first of all, we'll take a look at the investment process and more specifically what investment characteristics hold a higher priority for growth companies or growth investing revenue or cash flow growth of those companies is what holds the most important on the other hand value looks more at price and specifically whether that price is below a fundamental value that they have calculated. So in other words value managers are looking for diamonds in the rough. They're looking for companies that have fallen out of favor, but still have good fundamentals the value group may also include stocks on new companies have not yet been recognized by investors a great way to understand a differences between growth and value investing is to look at it with a real estate analogy. Now, here's the example growth investors are looking for the next. Up-and-coming neighborhood while value investors are looking for home prices less than what the market rental rates would dictate. Next that important difference is valuation growth companies tend to be more expensive and typical valuation metrics like price to earnings ratio while value companies generally trade at lower pe's growth companies tend to trade it higher multiples due to the expectations from investors of higher sales of profits in the future next risk growth Investments tend to be riskier and more volatile than value investment. And that's because given their high valuations for growth companies investors expect big things from these companies and if the growth that is being an anticipated doesn't materialize the price could plummet now value Investments tend to be older companies more stable companies that have proven an ability to generate profits and have a proven business model and therefore they're less risky. Now the exception to that are what we call deep value companies or distress companies that have been Very beaten down because there is a higher probability of failure given the negative trends within their business. Now, let's take a look at performance which strategy growth or value is likely to produce higher returns over the long term. Well the battle between growth and value investing has been going on for years which each side offering stats to support its arguments. Some studies have shown that value investing has outperformed growth over extended periods of time on a value-adjusted basis. However, value investors argue that a short-term focus can push stock prices to low levels which creates great buying opportunities for value. Now having said that generally growth stocks have the potential perform better when rates are falling and company earnings are rising. However, they may also be the first to be punished when the economy is cooling. Value stocks on the other hand are often stocks of cyclical Industries. They may do well early in economic recovery, but they are typically more likely to lag in a sustained bull market.