In addition to value investing, growth investing is another popular strategy in the stock market. While value investors focus on the valuation of stocks and look for statistically cheap companies, growth investors prioritize companies that they believe will experience rapid growth in the future. However, there is a strategy that combines elements of both value and growth investing called Growth at a Reasonable Price (GARP). This strategy is gaining attention among stock investors who want to find growing businesses without overpaying for that growth.
GARP investors typically use the price to earnings growth ratio (PEG) as a key metric. A PEG ratio of less than one is considered an indicator of a reasonably priced stock. By focusing on companies with a PEG ratio below one, GARP investors aim to identify stocks that offer both growth potential and reasonable valuations.
Retail investors who are interested in following a GARP strategy can consider investing in funds such as the Invesco S&P 500 GARP ETF or the JPMorgan US GARP Equity Fund. These funds provide a convenient option for passive investors who want exposure to a portfolio of stocks that align with the GARP strategy. While these funds charge a management fee, they offer diversification and professional management.
The GARP strategy offers an alternative approach for stock investors who want to balance growth and value considerations. By focusing on reasonably priced stocks with growth potential, GARP investors aim to achieve attractive returns while managing risk.
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