Value investing was firstly established by Benjamin Graham and David Dodd. But, the philosophy is made well known by Warren Edward Buffett. Warren Edward Buffett, the successful investor makes his investment based on this valuing investing philosophy. This value investing philosophy is quite different from the investing philosophy used by analysts. Though there is no guarantee for earning money, it is worthwhile for learning from Buffett.
Value investors believe a company has a certain level of intrinsic value at a specific point of time. This intrinsic value varies according to the company's competitiveness. Therefore, we should choose those companies with increasing competitiveness to invest. Then you have to estimate the value (reflected by stock price) of your potential investment target and minus the margin of safety from your estimated value. If the market price of such stock is lower than that, you should invest and hold the investment.
You are reminded that the value of a stock or a company is always changing. Many investors like to invest in stock with a low absolute price. Value investors on the other hand focus on the competitiveness and growth of a company. A successful value investor should get himself well prepared with a company's past, present and future performance.
Analysis is one of the key elements for a successful investor. Stock price fluctuates according to supply and demand and sometimes speculation. But, in the long run, the stock price of a company is largely dependent on its own competitiveness, potential and intrinsic value. To a value investor, the real intrinsic value of a company is much more useful than the stock price. Therefore, their decisions are less likely to be affected by the short term fluctuation of stock price.
Value investing focuses on long term steady growth instead of short term growth. The long term is talking about 20 to 30 years. The philosophy behind is to hold a competitive stock for 20 to 30 years for its continuous growth. Though the growth in every year is small, the total growth in 20 to 30 years is huge. In this long period of time, the stock price is changed by numerous external factors. With reference to history, the stock market at a whole goes up in the long run. Therefore, you are likely to gain money in the long run if you hold your investment now.
Many people love to take advices from technical analyses on newspaper, magazine and TV. As not many analysts use the value investing philosophy, taking their advices means walking away from value investing. Instead, you may analyze your investment with the simplest model like SWOT analysis. SWOT analysis focuses on strength, weakness, opportunity and threat of a company, which are the important attributes of the intrinsic value. This provides you with a detailed evaluation of the company's competitiveness and intrinsic value.
Value investors believe a company has a certain level of intrinsic value at a specific point of time. This intrinsic value varies according to the company's competitiveness. Therefore, we should choose those companies with increasing competitiveness to invest. Then you have to estimate the value (reflected by stock price) of your potential investment target and minus the margin of safety from your estimated value. If the market price of such stock is lower than that, you should invest and hold the investment.
You are reminded that the value of a stock or a company is always changing. Many investors like to invest in stock with a low absolute price. Value investors on the other hand focus on the competitiveness and growth of a company. A successful value investor should get himself well prepared with a company's past, present and future performance.
Analysis is one of the key elements for a successful investor. Stock price fluctuates according to supply and demand and sometimes speculation. But, in the long run, the stock price of a company is largely dependent on its own competitiveness, potential and intrinsic value. To a value investor, the real intrinsic value of a company is much more useful than the stock price. Therefore, their decisions are less likely to be affected by the short term fluctuation of stock price.
Value investing focuses on long term steady growth instead of short term growth. The long term is talking about 20 to 30 years. The philosophy behind is to hold a competitive stock for 20 to 30 years for its continuous growth. Though the growth in every year is small, the total growth in 20 to 30 years is huge. In this long period of time, the stock price is changed by numerous external factors. With reference to history, the stock market at a whole goes up in the long run. Therefore, you are likely to gain money in the long run if you hold your investment now.
Many people love to take advices from technical analyses on newspaper, magazine and TV. As not many analysts use the value investing philosophy, taking their advices means walking away from value investing. Instead, you may analyze your investment with the simplest model like SWOT analysis. SWOT analysis focuses on strength, weakness, opportunity and threat of a company, which are the important attributes of the intrinsic value. This provides you with a detailed evaluation of the company's competitiveness and intrinsic value.
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