An Insight Into Value Investing
Value investing is the secret to long-term growth. The ones who can learn about it will be more adept at handling the fluctuations of the market than those who cannot pick up this skill. The basic characteristic of value investing is that it involves buying securities ? the shares of which seem under-priced by basic analysis. In fact, the essence of value investing may be said to be purchasing stocks at a value that is less than their intrinsic value.
The concept of value investing was established by David Dodd and Benjamin Graham ? they were both professors at Columbia Business School, and taught many well-known investors. Today, value investing is a smart strategy when it comes to investment. Buying low PE ratio stocks, low price-to-cash flow ratio stocks, or low price-to-cook ratio stocks all come under value investing. Famous people in the field of value investing include William J. Ruana, Irving Kahn, Charles Brandes, and Warren Buffet ? who is probably the most famous among them.
When it comes to value investing, one can follow four certain basic tips. Firstly, one should look not just at the current share price, but also at the value of the entire company. The cost of buying the whole company is called market capitalization, and through the market capitalization test, you will be able to know if you are paying extra for a stock. You can also estimate the cost of a stock through the price to earnings ratio ? because this gives a decent standard for comparison for other value investing opportunities.
The second tip - observe ? is the company buying back shares? Ideally, you should have a management that tries to reduce the number of outstanding shares, if the other uses of capital are not value for money ? this will make each investor?s stake in the company bigger. Third, in the field of value investing, consider your advantages for investing in the company. Think about the aspects that interest you, and don?t forget to observe the current price, profits, management, staff, etc. Also, treat this as a business transaction ? don?t get emotionally attached to the company, keep your feeling in check. Does the stock seem undervalued? Then keep away from it.
Fourthly, and lastly, take a moment to think about whether you?d like to own the stock for the next decade or so. Are you willing to buy the shares and keep them for that long a time? If not, then this value investing is not your cup of tea. Here?s a valuable tip ? select a good company, when it comes to the initial stake, pay as little as permitted, ensure a reinvestment of dividends ? remember that effort and time are required.
The fundamental principle of value investing is based on the conjecture that there will always be some kind of fluctuation or disturbance in the market. Therefore, since the values of equities are constantly in flux, and changing in different directions, their fundamental values will differ ? and thus, some are likely to give better returns than others. So go for shares whose values have fallen (for no apparent reason), if you want to be great at value investing, and wait for the situation to correct itself. - 23218
The concept of value investing was established by David Dodd and Benjamin Graham ? they were both professors at Columbia Business School, and taught many well-known investors. Today, value investing is a smart strategy when it comes to investment. Buying low PE ratio stocks, low price-to-cash flow ratio stocks, or low price-to-cook ratio stocks all come under value investing. Famous people in the field of value investing include William J. Ruana, Irving Kahn, Charles Brandes, and Warren Buffet ? who is probably the most famous among them.
When it comes to value investing, one can follow four certain basic tips. Firstly, one should look not just at the current share price, but also at the value of the entire company. The cost of buying the whole company is called market capitalization, and through the market capitalization test, you will be able to know if you are paying extra for a stock. You can also estimate the cost of a stock through the price to earnings ratio ? because this gives a decent standard for comparison for other value investing opportunities.
The second tip - observe ? is the company buying back shares? Ideally, you should have a management that tries to reduce the number of outstanding shares, if the other uses of capital are not value for money ? this will make each investor?s stake in the company bigger. Third, in the field of value investing, consider your advantages for investing in the company. Think about the aspects that interest you, and don?t forget to observe the current price, profits, management, staff, etc. Also, treat this as a business transaction ? don?t get emotionally attached to the company, keep your feeling in check. Does the stock seem undervalued? Then keep away from it.
Fourthly, and lastly, take a moment to think about whether you?d like to own the stock for the next decade or so. Are you willing to buy the shares and keep them for that long a time? If not, then this value investing is not your cup of tea. Here?s a valuable tip ? select a good company, when it comes to the initial stake, pay as little as permitted, ensure a reinvestment of dividends ? remember that effort and time are required.
The fundamental principle of value investing is based on the conjecture that there will always be some kind of fluctuation or disturbance in the market. Therefore, since the values of equities are constantly in flux, and changing in different directions, their fundamental values will differ ? and thus, some are likely to give better returns than others. So go for shares whose values have fallen (for no apparent reason), if you want to be great at value investing, and wait for the situation to correct itself. - 23218
About the Author:
James Anderson the owner of the website http://www.thecontrariantrader.com uses several key indicators to pinpoint huge shifts in the crowds before they happen. Know more by visiting the website http://www.thecontrariantrader.com.
posted by X - Men @ 3:29 AM
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