Wednesday, 10 December 2008

Value Investing and Intrinsic Value

Value investing is a search for sound securities that sell at or below their "intrinsic value."

These investments are then held until there is strong incentive to sell them. For example,

  • the stock's price may have risen;

  • an asset value may have declined; or

  • a government security may no longer deliver the kind of return the investor could earn on competing securities.
The most profitable path in any case is to sell the security and move the money to another investment that is intrinsically undervalued.

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