Value investing is about investing in a company by value, not by price. What is the difference between value and price?
The price is what you will pay for it, and the value is worth it.
The stock market is volatile in nature, there is a lot of fluctuation in prices. If a lot of people are selling in stocks, the prices will fall; if enough people are buying, the prices of the same stock rise.
Benjamin graham the father of value investing first introduced the concept of value investing in the 1920s. He purchased stocks of those companies who were trading at two-third of their net value.
The value of the company remains the same and the company has not become better or worse in the low or high share price. If it is a stable company, it remains stable; if it is profitable, it is still profitable. Thus, value investing refers to make a qualitative analysis of the company in which it tends to invest.
The investor of this type of principle that buying shares are becoming a partner of the company, because of this, he must believe in the growth potential of the company. In value investing, investors buy such shares because he believes in the value of the company and wants to be part of the same.
If you invest in a good company, the ups, and down of the stock price should not affect because regardless of the stock price, the company’s value follows the same.
The intrinsic value, however, is an estimate of the investor. The estimate is grounded in detailed analysis using objective data, it is not observable and therefore includes the level of. You need assets liabilities, equity shareholding, and various other data to find out the value of the company.
You can access all this information for free with the help of Ticker, along with the information you can benefit from the latest news of the company you want to invest in. the exclusive feature of the ticker is bundled where you find shares of similar characteristics in one bundle i.e., you get all the shares of the company that is undervalued under one bundle.
You can also use the valuation calculator provided by the ticker to calculate the value of the company.
Buffet said to invest successfully you do not need to understand complex concepts or master the technical analysis, real investors only need to learn how to evaluate the company and how to think about the price of the stock. He further added,” I am a better investor because I am a business person and I’m a better business person because I am an investor.
Investing based on value investing is becoming a partner of excellent companies. The fundamental rule for the investor is to analyze companies as if evaluating a possibility of becoming a member of a big deal.
Value investing is to invest in a business that you like, know and trust. Your goal when investing should be to buy the stable prices, stocks of companies whose businesses are easy to be understood and whose profits tend to be exponentially greater in a horizon of five, ten-twenty years.
Investing in value is hunting discounts…
We understood what is value investing but how to begin?
The secret of the value investor is Discipline, Patience, and Psychological Strength.
The most important characteristic is to be mentally and psychologically trained to analyze and develop confidence because often investing in value is not the right way to reach a consensus. Discipline is essential for the investor to analyze and develop their studies and investment by their conviction and results. Often value investing presents investment options that go against the market trend, the discipline and focus are critical for investors to apply their capital respecting their studies and not be carried away by the herd. Patience means waiting for the time until the investment gets mature. It is important for the investor to face opposite positions to the market which can be uncomfortable from the psychological point of view.
The next strategy as a beginner you must follow is Buy and Hold
You must invest in stocks as a long-term investor because warren buffet said “if you are not willing to own stock for ten years, don’t even think about owning it for ten minutes.” In order to earn a better return from the investment, you must be patient and disciplined as said earlier. You must give time to your investment to grow.
You need to invest in a company that you understand, instead of wasting time assessing a company you don't understand, you need to invest in a company you understand and do the analysis you need to know where your company is. Perform fundamental analysis to understands the future development direction of the company, industry trends, and Factors affecting the development of the industry. If you don’t know a company, do your research first and then invest. If it looks complicated, turn to another company or business.
Investment opportunities are not always available, or in a dominant economic environment, it may not be the right time to invest in a particular industry. Valuable investment opportunities that arise through market adjustments are traded in individual stocks. However, these events cannot be accurately predicted if there are no companies on your list with your investment goals.
Buffet advised to buy and hold the shares, but the fundamentals of the company are not always the same, it also changes with time, an investor must know when it is the right time to sell the shares and look for other good stocks.
Buffett advises investors not to treat their investments as "stocks," but to treat the purchase of stocks as a purchase of the entire company. A company buys a company because it wants to own it, not because it wants the stock to go up. Investing is often more difficult than Warren Buffett. By following a simple method rooted in common sense, you can learn to manage your portfolio to better reduce the number of costly mistakes and high return on investment.
Always remember what Warren Buffet said “Price is what you pay. Value is what you get.”
S. Vishwa is a web marketing analyst at Finology Ventures. With 6+ years of web marketing experience, joined a Fintech company to help people to learn and earn more.