What Is Value Investing? (#13)

What Is Value Investing?

Value Investing is an investment strategy which have continously paid high returns to investors. It was introduced by Benjamin Graham in the 1920's.

You know, usually, when their is a sale in a mall. We rush to buy some stuff because in that case we get discount on that stuff. Right?

Similarly, Value Investing also encourage us to buy such stocks (which are on discount). These stocks which we get on discount are known as undervalued stocks.

Some Points We Are Supposed To Understand Before We Start Doing Value Investing!

PRICE & VALUE are both different. Price is what we give & Value is what we get.

Every company has it's own value known as intrinsic value. The intrinsic value depends on company's FINANCIAL STRENGTH & FUTURE GROWTH.

However, the stock price of a company depends on the market itself.

The stock/share price of that company can be less (<), more (>), or equal (=) to the company's intrinsic value.

In value investing we are more likely to buy a stock only when it is less than it's intrinsic value.

In Share Market the ups & downs are not a risk but instead an opportunity.

According to value investing the ups & downs in share market, the stock price is more likely to become undervalued & can be profitable in future to the one who buys it below its intrinsic value.

However, in general finance people think that ups & downs are risky. But in value investing it is nothing but a disbelief.

Because whenever we buy undervalued stocks the price is low not high.

The price of any stock follows it's intrinsic value in long term.

While, in short term the stock price can be less or more than it's intrinsic value. But it'll go back to it's intrinsic value later.

Like- If the intrinsic value of a company is 100$ now & its current share price is 50$, then in future for sure it'll go up & will have the share price of 100$. 

Similarly,

If the intrinsic value of a company is 100$ now & it has a stock price of 200$, then it'll come back down to 100$ in long term.

& that's how it works.

We need to calculate a company's intrinsic value, itself.

All you need is patience, hardwork & courage to do Value Investing!

Some Books On Value Investing.

The Intelligent Investment by Benjamin Graham is the best book ever written on Value Investing!

Thanks For Reading!