“Value Investing” is the principle by Benjamin Graham, and it is the basic principle that all investors should know. Before knowing about value investing, following the trends, I buy when the price goes up and I sell when the price goes down which is definitely wrong in the view of value investing.
In value investing, we buy when the price goes down, we sell when the price goes up. Therefore, the bear market that is usually seemed unwelcoming is favored in value investing since we see opportunities to buy in more when the price drops. The other way round, value investor will worry during the bull market since the high price may be overvalued. In simple words, we buy the stocks when they are undervalued. while we sell them when they are overpriced. We buy when people are in fear, we sell when people are excited with greed.
Again, invest but not gamble as I mentioned earlier in previous post. When buying the stocks, we are owning part of the company; therefore, you won’t simply buy any stocks without researches since you won’t want to own a bad company. Warren Buffet once said, “Imagine that you have only 20 attempts in deciding to buy which stocks throughout your life.” By this way, you will be more careful in investing and tend to know more about the company before buying its stocks.
In value investing, we don’t care about the fluctuations in a single trading day since we know that the stocks that we buy is undervalued and the price will go up one day, it is just the matter of time. Let the time and money to do the job for you. We don’t have to be emotional and get affected by the news everyday. For example, if you buy a stock that worth $1 with $0.60, you don’t have to worry much, but the most difficult part is that how we know that the stock priced at $0.60 is $1 worth. The other thing that have to overcome is the emotional part: how would you deal with the fear in market, how would you convince yourself to buy when you see other people are selling during a bear market, how would you make yourself to buy in more when the prices keep going down, how would you face the blood draining on the street.
What are your understandings of “value investing”?