This Value Investing Tip Is Almost Too Easy
The secret to long-term growth is value investing. Those who can pick it up effectively will be more skilled at handling the ebb and flow of the market, compared to those who cannot pick up this skill. Basically, value investing involves buying securities ? the shares of which seem under-priced by basic analysis. In fact, purchasing stocks at a value that is less than their intrinsic value is the essence of value investing.
David Dodd and Benjamin Graham ?both distinguished professors at Columbia Business School, established the concept of value investing. They were responsible for instructing many well-known investors. Today, it?s clear that when it comes to investment, value investing is a brainy strategy. Buying low PE ratio stocks, low price-to-cash flow ratio stocks, or low price-to-cook ratio stocks all come under value investing. Renowned people in the industry of value investing include William J. Ruana, Irving Kahn, Charles Brandes, and of course, Warren Buffet, who is probably the most famous among them.
When it comes to value investing, follow four certain basic tips. Firstly, don?t stop just at looking at the current share price, you should look at the value of the entire company. The cost of buying the whole company is called market capitalization, and the market capitalization test will make it clear if you are paying extra for a stock. The price to earnings ratio will allow you to estimate the cost of a stock ? because this gives a decent enough standard for comparison for other value investing opportunities.
The second tip is to look at whether the company is 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 value investing, consider your interests for investing in the company. What interests you about that company? Look at the current price, profits, management, staff, etc. And remember to keep your emotions in check ? treat this purely as a business dealing. Keep away from the stock if it seems undervalued.
The fourth and last tip - are you prepared to own the stock for the next decade or so? Do you think you can keep them for that long a time? If your answer is in the negative, then this value investing is not for you. Lay emphasis on selecting a good company, and when it comes to the initial stake, pay as little as you can. Attempt to ensure a reinvestment of dividends ? and of course, put in maximum time and effort, these will stand you in good stead.
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. - 23217
David Dodd and Benjamin Graham ?both distinguished professors at Columbia Business School, established the concept of value investing. They were responsible for instructing many well-known investors. Today, it?s clear that when it comes to investment, value investing is a brainy strategy. Buying low PE ratio stocks, low price-to-cash flow ratio stocks, or low price-to-cook ratio stocks all come under value investing. Renowned people in the industry of value investing include William J. Ruana, Irving Kahn, Charles Brandes, and of course, Warren Buffet, who is probably the most famous among them.
When it comes to value investing, follow four certain basic tips. Firstly, don?t stop just at looking at the current share price, you should look at the value of the entire company. The cost of buying the whole company is called market capitalization, and the market capitalization test will make it clear if you are paying extra for a stock. The price to earnings ratio will allow you to estimate the cost of a stock ? because this gives a decent enough standard for comparison for other value investing opportunities.
The second tip is to look at whether the company is 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 value investing, consider your interests for investing in the company. What interests you about that company? Look at the current price, profits, management, staff, etc. And remember to keep your emotions in check ? treat this purely as a business dealing. Keep away from the stock if it seems undervalued.
The fourth and last tip - are you prepared to own the stock for the next decade or so? Do you think you can keep them for that long a time? If your answer is in the negative, then this value investing is not for you. Lay emphasis on selecting a good company, and when it comes to the initial stake, pay as little as you can. Attempt to ensure a reinvestment of dividends ? and of course, put in maximum time and effort, these will stand you in good stead.
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. - 23217
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 @ 3:39 AM
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