If you are a beginner in value investing and feel uncertain that you are on the right track, this post might help you. It has 3 essential things you need to know about value investing to aid you on the road to development.
Click on the links that appear throughout this article to enhance your understanding.
Take a quick glance at How to Evaluate a Business: The Lazy Investor's Guide for a deeper view at value investing in practice and the kind of financial evaluation that is a critical tool when looking at stocks to acquire.
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#1 Benjamin Graham Is the Father of Value Investing
Benjamin Graham formulated it. In short, he invented the idea that an investor can value a company and should aim to buy its stock below the value at which the company is truly worth.
Benjamin Graham's' most popular books are The Intelligent Investor and Security Analysis (1934). Benjamin Graham wrote The Intelligent Investor for beginners and is the foundation for my investing approach and the one that I use on The deepbluegroup
#2 Think Of Stocks as Entire Companies, Not Just Figures on a Screen or Pieces Of Paper
Quite often, investors are obsessed with the image of a huge bank of screens with flashing blue and red figures when they hear the phrase stock market. The reality is this: those figures merely symbolize the price of one share of stock for a business. The price may rise and fall on a minute-by-minute basis but the truth remains that it signifies how much the stock market values one share of stock at any instant during a period of time.
#3 Ensure That a Margin of Safety Exists Before You Buy
Even with the best intentions in the world, value investors will still make mistakes.
At times, the valuation of a business can be wrong, even after meticulous, deep analysis. Also, there are the dynamic movements of the stock market to input into the picture – high frequency trading, black boxes, algorithms – the stock market and stock market prices have evolved into quite a turbulent ocean in recent years.
These two factors can cause you to become dizzy as you watch the value of your investments get pummeled around like a football – up and down, rolling and never stopping long enough to make you stay on an even keel.