Value investing is a strategy that investors, like the world’s third richest man Warren Buffet, have utilized for years. These financial gurus often beat the average annualized returns of the S&P 500, an index of very important stocks like Coca-Cola and FedEx.
It isn’t a stretch to compare value investing to coupons. Bargain hunters know that one method to maximize savings is to combine a coupon with a product that’s already on sale.
When products are available for a fraction of original price, savvy shoppers “stock” up and buy more than one. That way, there’s enough stockpiled to last until the sales cycle rolls around again.
Bottom line, value investing works the same way. Buying stocks from companies is among the many tried and true methods of investing. A stock is a security that signifies ownership in a corporation and represents a claim on part of that corporation’s assets and earnings.
Make certain when value investing, the stock’s current market value (what it is selling for now) is less than its intrinsic value (true value). In essence, investors should think about a multiple stock purchase when the current market value of a company’s stock is below its intrinsic value.
- Buy only what you can afford.
- Remember that the “sale cycle” for stocks comes around again, so you’ll have another opportunity to buy.
- The key to investing is diligence and patience (which couponers have in abundance).
Learn more about value investing by reading instructional books and consulting websites like Investopedia.
This has been a guest post by Sherri from Manassas, VA
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