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What is value investing? How does it help you to get better rewards?



Value investing is referred to an investment paradigm that involves buying securities that appear under-priced by some form of fundamental analysis. It is basically an investment strategy that involves picking up stocks that appear to be trading for less than their intrinsic or book value. The value investors are those who actively ferret out stock that is underestimated in the stock market.


They are the ones who are long-term investors and do not follow the trend. The buy undervalued stocks of strong companies and wait for a long period of time to gain from the investment. It’s their patience and utter knowledge on which stocks to invest in and wait for the right amount of time which gives them benefits.



Let us first understand how value investing works. The basic idea behind investment is to buy at a lower price and sell at a higher price to benefit from it. Talking about stocks, a company’s stock price can change even when the company’s value or valuation has remained the same. They go throw high or low demand and price fluctuations. Value investors find stocks with low market value and then wait for a long period of time and then get rewarded.


Investing itself is a risky business unless one has some knowledge about it and invests smartly. In terms of value investing, people have to wait for a longer period of time and hence one should have prior knowledge before doing so. Some people refer value investing as intelligent investing too. A person has to be aware of the market and be smart enough to invest in a quality undervalued company. The decision should be made after a strong fundamental analysis.



The strategy is to buy and hold. One should pay attention to the current events nicely. Doing a proper analysis before investing will give one safe and steady returns on the investment. Such investors buy a stock when the price is below its intrinsic value. Investors find and buy stocks which are undervalued. They look for a margin of safety before buying a stock. This means there is a gap between what one will pay for the stock while buying and what one will earn while selling it.


They key points are to do your research. Take your time and analyse before investing. Find a financial structure in the plan as it is a long term investment plan. Such investors usually have different types of investments in their portfolios which protects them from serious losses. They look for safe and steady returns. This is how value investors get better values as they buy the stocks for a low value and get better returns.




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