What is value investing?
- Submitted by 6 months ago
The premise of value investing is that the market isn’t always efficient in pricing a company’s intrinsic value. A value investor seeks to exploit these inefficiencies to profit from them. This is usually by being contrarian and going against the herd (all typical value investing terms). It’s the strategy most associated with the common investing phrase ‘buy low, sell high’. The value investor seeks out value stocks that are trading below their book value.
Value investing is an investment strategy that involves buying securities, such as stocks or bonds, that are believed to be undervalued by the market. The underlying principle of value investing is to acquire these assets at a price lower than their intrinsic or true value. Value investors seek opportunities where the market price of an asset is temporarily lower than its fundamental worth, with the expectation that the market will eventually recognize and correct the undervaluation.
The phrase "buy low, sell high" encapsulates the core idea of value investing, where investors aim to purchase stocks at a price lower than their intrinsic value, expecting that the market will eventually recognize and correct the undervaluation. While value investing has been a successful strategy for many investors, it's important to note that, like any investment approach, it comes with its own risks and challenges. Market conditions and investor sentiments can change, impacting the performance of value stocks.