Value Investing



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Value investing in an investment concept in which shares and securities are bought at undervalued prices. These securities and shares might be in stock in public companies and are traded at discounts or at their tangible book value. 

The history of the concept of value investing dates back to 1928 where Benjamin Graham and David Dodd started teaching at Columbia Business school. The market price of the stock is discounted to its intrinsic value and that is termed as the margin of safety.

This in turn protects the investor when the market goes down. The central basis of value investing concept lies in the margin of safety. A person should purchase a stock if it value is worth more than its current price in the market. There is also some room for error as two investors might perceive different intrinsic value of the same stock with the same information that they have. Value investing is directly correlated with long term growth. Those who completely understand the value investing concept and practice it are usually able to survive the ups and downs of the market. These value investors have a long term goal as they wait and keep shares with them for a longer period of time till the price of the share matches its real value.

A value investor should carefully study the business fundamentals first before investing. The concept of earnings growth, cash flow, dividends and book value should be crystal clear. When selecting a particular company the investor should analyze its business fundamentals and check if there is anything wrong with the company due to which the stock is trading at a lower price. If everything is alright and nothing is wrong which can be attributed to the low price of the share then that stock investment is considered best for investment. The patience of the investor is then rewarded after a certain period of time when the market corrects its price.