Recent interest rate increases have led to talk about increasing the weight of value stocks. But in the long run, growth stocks versus value stocks don't really matter. 

Will truly great investors make money with growth stocks and lose with value stocks? Everyone has their own style, but true professionals don't blame their tools. In fact, there are three issues that are more important than style when it comes to stock selection: 1) good companies, 2) good stocks, 3) buying at a good price. What is the meaning behind this obvious question? 

1) Good companies - ultimately Growth.​ 

Good companies, simply put, are companies that are growing. And in a sustainable way. So are non-growing companies unattractive? Of course. Ultimately, where does company value come from? From the company's profits. So what do you need for profits to continue to increase? Sales need to increase or margins need to increase. To assess how sales can increase or margins can increase, we look at technology, capital, network, consumer loyalty, competitors, and so on. 

The capitalist environment we live in is always an inflationary environment, except in extremely rare cases like the Great Depression. This means that over time, the value of nominal currencies naturally declines, not that it's strange. What about the sales and profits companies earn? Of course, they are nominal values. Therefore, companies that are not growing cannot protect their own value from inflation. Protect your value from inflation? That's a familiar saying, isn't it? If you invest in stocks to protect your assets from inflation, but the company you invest in doesn't grow? Your investment is meaningless. 

However, there are times when investment attractiveness exists even though it does not grow. This comes from the asset value, which is the result of the company's past performance, but in this case, two conditions must be met. 1) The time for the realization of asset value must come in the foreseeable future, and 2) the distribution of asset value when it is realized must be fair to all shareholders. How do you know about 2? There must be good Management, which is mentioned in the good stock section later. 

2) Good stocks - ultimately Management.​ 

Some investors might think that this is the same as number 1. But unfortunately, there are good companies but not good stocks. This is quite common in the Korean stock market, especially. Why? Because Management is bad. In what way? In that it does not respect the value of minority shareholders. 

You've probably heard a lot of people say that when you buy stocks, you become the owner of the company, so you should look at it like a businessperson and invest. But this is only true if your business partner is someone you trust. You've probably heard a lot of stories about how a successful businessman lost a lot of money and went bankrupt in an instant because of a betrayal by a business partner he trusted. It seems like something that only happens in business, but it's the same with stock investments. It is important to remember that becoming a minority shareholder means trusting the majority shareholder with your money. 

3) Good price - ultimately Valuation. But the hardest part.  

This is probably the easiest part to understand. What is a good price? The cheaper you buy, the better. But the problem is? If you keep waiting, you're more likely to just suck your thumb.   In fact, valuation is one of the most difficult issues for individual investors. For institutional investors who think about this every day for a living, valuation is always a difficult issue. And in most cases, the answer is not determined by me, but given by the market, so individual investors should not be too strict with their standards, but rather be flexible in their approach. 

I'm going to buy at a P/E of 10 times this year's earnings and sell at a P/E of 15 times next year's earnings. Therefore, the purchase price is this much and the selling price is this much, which seems perfect at first glance, but in reality it's a very difficult thing to do. Especially, it's not easy to match this year's earnings with next year's earnings, and it's even harder to match the upper and lower limits of valuation. Since everyone has difficulty with it, the common standard is 1) past figures or 2) competitor figures. 1) Even if you use the past average as a standard, if you don't know which cycle you're investing in, it doesn't make sense if the standard deviation gets bigger. 2) In the case of competitor figures, it's difficult to see them as independent variables because if I go bankrupt, competitors will also go bankrupt, and if I get better, competitors will also get better. What's the conclusion? Valuation is inherently difficult, so don't be too picky.