There are countless investing strategies that investors can focus on to generate wealth.
Two of the most common are growth and value. These two strategies are often viewed as opposing investment styles.
However Global X offers ASX ETFs that combine the best of both worlds.
Growth vs Value
Growth investors seek companies with above-average revenue and earnings growth.
The attraction is that businesses can sustainably grow their earnings and have the potential to compound shareholder value over time.
However, it can come with a price.
As investors become increasingly optimistic about a company's prospects, its valuation can rise well ahead of its fundamentals.
If expectations are not met, even a high-quality company can experience a significant decline.
On the other side of the coin sits value.
Value investors take a different approach, seeking companies that appear inexpensive relative to their fundamentals.
The challenge is distinguishing between a genuine opportunity and a value trap.
A company may look cheap because its earnings are deteriorating, profitability is falling or its competitive position is weakening.
Balancing both using Growth at a Reasonable Price (GARP)
According to Global X, GARP seeks to navigate between these two extremes.
The opportunity lies where these characteristics intersect.
GARP doesn't just blindly pay for growth or buy what looks cheap. It is about finding businesses where the growth opportunity is supported by quality fundamentals and where the price remains reasonable.
Rather than trying to predict which factor will lead the market next, GARP combines several characteristics within a single framework.
This can provide advisers with a more balanced approach to factor investing, seeking exposure to companies with sustainable earnings growth while maintaining discipline around valuation and quality.
How to invest with GARP principles using ASX ETFs
For investors looking to apply GARP strategy to their own portfolio, there are several ASX ETFs to consider.
The first is the Global X S&P World Ex Australia GARP ETF (ASX: GARP).
It provides exposure to approximately 250 global companies that meet the GARP criteria, combining growth, quality and valuation characteristics.
Since launching in September 2024, GARP has demonstrated the potential of the approach in live market conditions, ranking among the stronger-performing factor strategies over the period.
For investors looking to apply the same framework to Australian shares, an option to consider is the relatively new Global X S&P Australia GARP ETF (ASX: GRPA).
It provides exposure to approximately 50 Australian companies selected for their combination of growth, financial strength and reasonable valuations.
It also applies a systematic approach to identifying companies where these characteristics align, but within the Australian equity market.
The post How to balance growth and value using these 2 ASX ETFs appeared first on The Motley Fool Australia.
Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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