Everything you need to know about value investing and how to get started


Investing can often seem overwhelming to so many people who would like to start putting their money to work for them. This is largely due to the perception that investment opportunities require extensive knowledge of financial markets acquired over many years. If this sounds like you, even from a distance, terms like the stock market, stocks, and stocks are likely to make you feel a bit of anxiety and doubt. Fortunately, this is not necessarily so. The truth is, there are several lucrative investment options and strategies that even beginners can benefit from.

About Value Investing

Value investing is an investment strategy that does not require universities to know the financial markets to profit from them. Instead, using the very doable fundamentals of this strategy, you’ll also use the tips and tricks Warren Buffet and Benjamin Graham used to invest for intrinsic value and grow their wealth. These principles include the following:

– Understand that businesses have intrinsic value that can be bought and sold

– Define your safety margin

– Rethink the efficient market hypothesis

– Drive from the front

– Be diligent and patient,

Here’s how each of these value investing principles will work for you.

1. Understand the intrinsic value of businesses

When it comes to investments, every business has intrinsic value that is often reflected in its financial statements. Stocks and stocks are the means by which the average person can buy the value of these companies. Importantly, the prices of stocks and shares can fluctuate even if the intrinsic value of the company remains stable. In addition, the prices and sales of these stocks and shares are not advertised per se. As such, you will need to do a bit of detective work to find stocks and stocks in stable companies that are sold at a low price, which will allow you to earn more in the long run.

2. Define your safety margin

Profits and losses when investing depend primarily on your “safety margin”. You are likely to profit more with a healthier margin because your margin of safety is the difference between the value of the stock and the price you pay. So a stock might be worth $ 50.00, but you bought it for $ 10.00. In this case, your margin is $ 40.00 ($ 50.00 minus $ 10.00).

Essentially, you are maximizing your margin of safety by buying your chares or shares at lower prices (as low as possible) so that even if the level of growth is lower than expected, you are still able to minimize losses and gain. of your investment when it’s time to sell. Once you buy your stocks, you just wait for them to reach or approach real (intrinsic) value.

3. Rethinking the hypothesis of an efficient market

Unlike value investors, investors who claim the efficient market hypothesis believe that stock prices reflect the real value of a company. However, value investors do not buy into this assumption. Instead, they believe that stock prices can be valued below or above their true value. It is this real (or intrinsic) value that becomes the focus of value investing.

4. Drive from the front

Due in large part to the fact that value investors do not subscribe to the assumption of an efficient market, they are less likely to follow the investment patterns or habits of the general trading population. That is, they are less likely to buy when everyone else is buying or selling when they are selling. Instead, they can stand firm or sell when others buy, for example.

5. Be diligent and patient

Finally, once you have started the process of value investing (i.e. you have bought stocks or shares of a particular company and are now active in the stock market , you have to be patient in order to reap your rewards. There is a good chance that you will buy your stocks. for prices below the real value of the company. Therefore, you will have to wait to see the dividends of this. In addition, you must be diligent in observing the market and assessing the value of your investments.

Source by Adam Ziolo

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