Today I am going to share with you on the topic. What is value investing?
Value investing is the act of buying stocks that are undervalued, or trading for less than their intrinsic value. The goal is to buy the stock when it is temporarily priced low and then sell it for a profit when the price recovers. Value investing can be more simply described as buying stocks on sale.
Value investing is a strategy that relies on the following assumptions about market behavior and investing.
• Investors do not always act rationally. The market can overreact to news, pushing stock prices too high or too low. Value investors can profit from these swings in market sentiment by buying stocks that are undervalued and selling stocks that are overvalued.
• Irrational market pricing is temporary. Over time, the market will correct itself and stock prices will return to their fair value. Value investors are patient and willing to wait for the market to correct itself.
• Business value is quantifiable. Value investors use financial analysis to determine a company’s intrinsic value. They look for companies with strong fundamentals and sustainable competitive advantages.
• Good companies eventually prove their worth to the market. Value investors believe that good companies will eventually be rewarded by the market. They are willing to invest in these companies for the long term, even if the market does not recognize their value immediately.
• Long-term compounding is the surest route to building wealth. Value investors are not interested in making quick profits. They focus on long-term compounding, which is the process of reinvesting profits to grow their wealth over time.
I hope this video helps you in understanding what value investing is.
Reference: https://www.forbes.com/sites/investor-hub/article/what-is-value-investing-and-4-best-strategies/?sh=39817faa732f
