{"id":202,"date":"2020-01-28T04:57:48","date_gmt":"2020-01-28T04:57:48","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=202"},"modified":"2020-01-28T05:11:04","modified_gmt":"2020-01-28T05:11:04","slug":"growth-vs-dividend-stocks-meaning-comparison-where-to-invest-in","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/growth-vs-dividend-stocks-meaning-comparison-where-to-invest-in\/","title":{"rendered":"Growth Vs Dividend Stocks – Meaning, Comparison & Where to Invest in?"},"content":{"rendered":"
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When it comes\nto investing, there are plenty of questions that come forth. It\u2019s like an\nendless \u2018hows\u2019 and \u2018whys\u2019 about stock investing. One such query is whether to\ngo for the growth stock or dividend stock. There are different types of stocks\nbased on various parameters and growth stocks and dividend stocks are one of\nthose. These two stocks are basically categorized on the basis of dividend\npayment and are pretty simple to differentiate them. <\/p>\n\n\n\n

But merely\ndifferentiating them isn\u2019t enough as the burgeoning question is which one of\nthem is a better prospect. So here we are to look into these stocks and form a\ncomparative to find out which stock is best suited for an investor. Read along.\n<\/p>\n\n\n\n

What is Growth Stock?<\/strong><\/h2>\n\n\n\n

Growth Stocks\nare those stocks that tend to grow at a higher rate than others in the stock\nmarket. These stocks have future potential and are known to be part of the\ncompanies with a growth mindset. In a growth stock, rather than paying high\ndividends to the user, the company reinvests the earnings so that they can grow\nat a fast pace. This result in the share value of the company grows at an\nexponential rate and tread on a higher note than the normal growth margin of\nthe market. <\/p>\n\n\n\n

Growth stocks are much more lucrative for those who want to be in the game in the long run. If anyone is willing to go for the long term equity investment<\/a><\/strong> and wants to see their wealth multiply over the years then this one is more suited for their profile. This does put them at the loss of a potential dividend earning which can be achieved with the dividend stock. <\/p>\n\n\n\n

What is Dividend Stock?<\/strong><\/h2>\n\n\n\n

Dividend\nstocks, on the other hand, are stocks offered by companies that tend to offer\ndividends to the shareholder at the end of the year. These stocks are also\ncalled as income stocks. Dividend stocks tend to be a great investment option\nas they provide a source of passive income to the investor. These stocks belong\nto stable companies and they tend to offer dividends on a regular basis. <\/p>\n\n\n\n

Investing in\na dividend-paying stock is a great way to add diversity into your portfolio and\ncreate a source of passive income. Generally, the share prices of these stocks\ndon\u2019t tend to grow as much as the growth stocks, but that\u2019s not what they are\nknown for. <\/p>\n\n\n\n

Comparison between Growth Stocks and\nDividend Stocks<\/strong><\/h2>\n\n\n\n

Here\u2019s a\ncomparison of growth stocks and dividend stocks based on different traits. <\/p>\n\n\n\n

\n Comparative Trait<\/strong>\n <\/td>\n Growth Stock<\/strong>\n <\/td>\n Dividend Stock <\/strong>\n <\/td><\/tr>
\n Cash flow <\/strong>\n <\/td> Growth stocks are for those who want a long term wealth creation and are not looking for a passive consistent income source. <\/td> Dividend stocks tend to provide a consistent source of passive income via the dividend. <\/td><\/tr>
\n The time horizon for cash inflow <\/strong>\n <\/td> Here the cash flow will only result when you sell your stock. <\/td> Here the cash flow can be witnessed regularly. <\/td><\/tr>
\n Type of Company <\/strong>\n <\/td> Growth stock-based companies are those who have a future projection of high growth later on. <\/td> Dividend stocks based companies are stable companies that have a steady cash flow and don\u2019t have any impending capital projection going further. <\/td><\/tr>
\n Taxation liability under the Income Tax Act, 1961<\/strong>\n <\/td> In case of growth stocks, whenever you sell your stocks you command a taxation liability in the form of long term capital gain. <\/td> With dividend stocks, you do command a taxation liability when you sell your stocks just like growth stocks, but the dividend payouts received are tax-free at the hands of the receiver. <\/td><\/tr>
\n Growth parameter<\/strong>\n <\/td> Generally, growth stocks underperform in comparison to the dividend stock. <\/td> Dividend stocks tend to outperform growth stocks. <\/td><\/tr>
\n Compounding effect <\/strong>\n <\/td> With growth stock, the investor can enjoy the benefit of compounding as the excess profits of the company are re-invested back into it giving your investment value a surge in growth. <\/td> With a dividend stock, you cannot enjoy the compounding effect as the dividends are paid out and aren\u2019t re-invested back by the company. <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Why Invest in Growth Stocks?<\/strong><\/h2>\n\n\n\n

We all have\nfinancial goals in mind. These goals tend to vary from a short term like\nplanning a vacation or more to a long term like a retirement fund or buying a\ndream house. For these goals to materialize we need to find amicable investment\nsolutions that will help us attain that coveted corpus in the long run so that\nwe can fulfil our goals. This is where growth stocks come in. <\/p>\n\n\n\n

Growth stocks\nare a great way to see your investment grow multifold and generate you a large\npool of money in the long run. Growth stocks are relatable towards long term\ninvestments and are best suited for long term financial goals. It is expected\nthat the company will expand and will prosper in the long run allowing the\nvalue of the stock to surge in prices. This will provide the investors with an\nexcellent opportunity to see their initial investment grow multifold and become\nmulti-baggers. <\/p>\n\n\n\n

Why Invest in Dividend Stocks?<\/strong><\/h2>\n\n\n\n

Dividend\nstock as we talked about is the one where you\u2019re more likely to see a regular\nsource of cash inflows in the form of a dividend. Dividend stocks are a great\nsource of passive income for any person. It helps to realize the short term\ngoals with these regular passive incomes. It\u2019s not that dividend stocks are\nmerely tied down to dividend payouts only. They also tend to offer capital\nappreciation, although not in the same vein as that of a growth stock. <\/p>\n\n\n\n

Dividend\nstock is a perfect investment option for those who want a passive source of\nincome all the while also seeking capital appreciation. And since companies\noffering dividend stock are often those who are financially stable, your\ninvestment is likely to be safe. Add to it the benefits like exemption from\ntaxation under the Income Tax Act, 1961 for dividend received; it seems more\npalatable to opt for it. Dividend stocks are also opted by many so as to\ndiversify their investment portfolio apart from the allure of regular cash\ninflow. <\/p>\n\n\n\n

Final Words<\/strong><\/p>\n\n\n\n

Both growth\nstocks and dividend stocks are a great source of wealth creation for any\ninvestor. There is \u2018no one size fits all\u2019 theory when it comes to an investment\nas different people have different investment goals and plans. Both of these options\ntend to present a viable solution for investors who are willing to venture into\nthe stock market. You can opt for the one which suits your needs and goals. <\/p>\n

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When it comes to investing, there are plenty of questions that come forth. It\u2019s like an endless \u2018hows\u2019 and \u2018whys\u2019 about stock investing. One such […] Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":203,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,7],"tags":[37,38],"class_list":["post-202","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-market","category-investment","tag-growth-stock","tag-dividend-stock"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/202","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=202"}],"version-history":[{"count":3,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/202\/revisions"}],"predecessor-version":[{"id":206,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/202\/revisions\/206"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/203"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}