PRINCIPLES OF VALUE INVESTING:INVEST WITH SAFETY MARGINS !

PRINCIPLES OF VALUE INVESTING:INVEST WITH SAFETY MARGINS !
PRINCIPLES OF VALUE INVESTING:INVEST WITH SAFETY MARGINS ! 

Table of Contents

 * Investment of value depends on internal value
* Always invest with safety margins :
* Price Negotiations require a contrast mind set
* Know What you have and why you own it
* Remember

Value investing is the art and science of buying a stock whose fundamentals are discounted on value.

 That is, here it is seen whether the stock is trading at the price of which the share is really worth it.

Some of the world's most famous investors, including Berkshire Hathaway's CEO Warren Buffett and Peter Lynch of Fidelity Investments, have used a value investment approach to earn better returns for themselves and their investors over time.

Warren Buffett is widely regarded as one of the greatest investors of the time, but if you ask him who he is the biggest investor, then he will probably mention one person: his teacher Benjamin Graham.

Graham was an investor and investment mentor, generally considered to be the father of security analysis and value investing.


His ideas and methods of investing have been well documented in his books "Security Analysis" (1934) and "The Intelligent Investor" (1949), which are two of the most famous investment texts written so far.

 These texts are often considered essential reading material for any investor, but they are not easy.

In this article, we will focus on Graham's main investment principles and will start to understand his triumphant philosophy.

INVESTMENT OF VALUE DEPENDS ON INTERNAL VALUE

Value investors believe that for a long time, the price of a stock usually corresponds to the company's underlying value or its internal value.

 But they also believe that in the near term, stocks can be made inaccurately valuable or worthless, and they are looking for stocks that can be bought on adequate "discounts" at the internal value.

Whether it is due to bad news, the misfortune of a similar company, good news that has not been widely recognised, or a market-share sale, will be the time when stocks of good companies get discounts on internal value, Really worth it.

Value investors try to buy those shares in those moments. They hold those shares until their prices match their internal values.

ALWAYS INVEST WITH SAFETY MARGINS:

The difference between the internal value of a stock and its current market value is called the margin of security.

 The key to value investing is to find stocks with good margins - or, in some other way, many upside potentials.

Remember that avoiding losses is our first priority: If the price of a stock is less than its internal value, then there is less chance of a steady dive during the period of market volatility.

The possibility of its rapid and sudden decline is less when the company's exit from the company's favour.

The idea of ​​a margin of security is a key principle of investment. It helps to protect your portfolio from shocks that completely affect the wider industry or the market.

And, of course, it also represents the possible reversal of the investment: If you have bought a discount on the internal value of the company, then you can assume that the price of the stock will increase closer to its internal value over time.

But to understand whether the margin of security is real - or to understand why stocks seem to be cheap, there should be another way - you have to take some time to learn about the company and its position.

PRICE NEGOTIATIONS REQUIRE A CONTRAST MINDSET

If you feel the need to "go with the flow" while investing, then value investment can not be for you.

According to almost the definition, investors looking for undetermined shares are looking for investment opportunities which other investors have made eye-to-eye.

You can sometimes check for companies by suggesting that stocks are cheaper than actual company value - but do not be surprised if you find them in the corner of the market which seem wildly unpleasant.

The big issue here is that successful value investing is often meant to have thoughts that are contrary to traditional knowledge or opinion of experts.

 It is not always easy because the idea of ​​investing real money with methods that go against the advice of highly salaried professionals can be challenging and very difficult for some.

KNOW WHAT YOU HAVE AND WHY YOU OWN IT

Value investment is not a passive strategy. To be successful, the value investors need to know the companies with whom they have and why they are their owners.

 What does it do? Who are its competitors? Why is its stock being sold at discount? Why do you expect the price of shares to increase over time?

When you invest for the first time, it is important to know those things. But it is important to stay up to date on major events affecting the company, so that you can answer those questions correctly.

At least, read the company's annual report and keep at least half an eye on the news related to the company so you can understand if its status is changing.

 If something happens which reduces its internal value, then you will need to re-evaluate.

REMEMBER

Reducing the loss is a high priority. If a company takes a turn for worse with no potential improvement on the horizon, selling its stock can be the best option, even if it means losing the loss.

To understand whether this is true, you have to be familiar with the company and understand why you own the stock.


This is the principle on which value investment is hinged and it is very important for you to fully understand and implement them to become a successful investor.


thanks for the time .

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