What is Value Investing ?
What is Value Investing ?
Moving ahead with our Share market Course tutorial, let us start to get little technically fundamental ! Wow, this sounds so confusing !
You would have heard about Value Investing either on TV or internet or some Investor or some trader declaring value investing to be dead !
So What is Value Investing ?
In simple term, Value Investing is a method which involves
- How to value stocks - Putting a price tag to the Share
- Finding Undervalued stocks - Finding shares which are trading below their intrinsic value
- Understanding Stock market probability of earning before investing in that share.
Margin of Safety - Buying that share at a price which is much below its value.
- Holding on to that share till market realizes this discrepancy ! Once everyone starts to buy, share price rise. It may rise to its correct value or may go more than its value.
- Sell the shares when the Value Investor believes its overvalued.
- Repeat it again and again.
Who started Value Investing and Fundamental analysis of Shares ?
Value Investing was first taught by Mr Benjamin Graham and Mr David Dodd and discussed in the book "The Intelligent Investor", considered the best book on Investment.
One of the most popular quote related with Value Investing is
Price is what you pay, value is what you get !Mr. Warren Buffett
Do shares become undervalued ?
Of course YES ! Many times, because of fear or oversight, shares do become undervalued. Infact there may be hundreds of reasons why Shares may become undervalued, something which I have discussed in Why Share price rise and fall.
Why value investing ?
Investing anywhere whether its Real estate or Stocks, if you cannot value your investment, prior investing, then its speculation not investment !
That is why value investing !
Same described beautifully
An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.Intelligent Investor
Value Investing is contrarian in nature !
When most people are afraid and selling, whatever may be the reason, Value Investors buy, because of the bargain price !
When most people are greedy and buying, whatever may be the price, Value Investors sell !
Value Investors are contrarian, in this sense, as they stick to the value of the company and not only to the price !
Before we proceed to understand how to value stocks, let us first understand the difference between Stock trading vs Stock Investing and popular methods of Share market Investing viz Fundamental Analysis vs Technical analysis ! The mentioned chapters also explains why I always prefer Investing over trading.
VALUE INVESTING STOCK INVESTMENT VALUING STOCKS FINANCIAL PLANNING FUNDAMENTAL ANALYSIS
FINANCIAL PLANNING FUNDAMENTAL ANALYSIS STOCK INVESTMENT VALUE INVESTING VALUING STOCKS