Growth vs. Value

Diversify your portfolio by investing in both "growth" stocks and "value" stocks. There are no cut and dry boundaries for stocks to be included in either category, but many mutual funds use the categorizations to describe their investing philosophy. A growth stock is a stock that has the potential for large growth. These stocks are smaller and riskier and don't pay dividends. A value stock is a stock from a larger company that hasn't been noticed by the market yet. It will usually pay a dividend and will have a low P/E ratio.