Wednesday, 29 April 2020

An Simple Introduction to Value Investing

Knowledgeable investing can impact significantly on your life:  

  • it can provide for a comfortable retirement
  • send your children to college and 
  • provide the financial freedom to indulge all sorts of fantasies.

Grocery shopping

Think of the search for value stocks like grocery shopping for the highest quality goods at the best possible price.  Understanding the philosophy of value investing, you learn to stock the shelves of your value store (portfolio of stocks) with the highest quality, lowest cost merchandise (companies) you can find.

More people owns stocks today than at any time in the past.  Stock markets around the world have grown as more people embrace the benefits of capitalism to increase their wealth.  Yet how many people have taken the time to understand what investing is all about?  No very many.

Making knowledgeable investment decisions can have a significant impact on your life.

Sensible investing, which can be found in the art and science of the tenets of value investing, is not rocket science.  It merely requires understanding a few sound principles that anyone with an average IQ can master.''

Value investing has been around as an investment philosophy since early 1930s.  The principles of value investing were first articulated in 1934 when Benjamin Graham, a professor of investments at Columbia Business School, wrote a book titled Security Analysis.  This approach to investing is easy to understand, has greater appeal to common sense, and has produced superior investment results for more years than any competing investment strategy.

Value investing is a set of principles that form a philosophy of investing.

It provides guidelines that can point you in the direction of good stocks, and just as importantly, steer you away from bad stocks.  Value investing brings to the field a model by which you can evaluate an investment opportunity or an investment manager.  Value investing provides a standard by which other investment strategies can be measured.

Why value investing? 

Because it has worked since anyone began tracking returns.  A mountain of evidence confirms that the principles of value investing have provided market-beating returns over long periods.  And it is easy to do.

Few investors and few professional money managers subscribe to the principles of value investing.  By some estimates, only 5% to 10% of professional money managers adhere to those principles.

Benjamin Graham, Walter Schloss and Warren Buffett are committed value investors.  Learn from their histories.

You need to invest but you don't need to be a genius to do it well.

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