What do value investors do

Value investing: 5 concepts for success

The simplicity of value investing is remarkable compared to other investment strategies.

Background knowledge and many years of experience are often not necessary, although both are of course an advantage.

Value investing: 5 concepts help you get started

There are basically 5 concepts that will help you get started in the world of value investing. Find out more about this high-potential strategy.

Basically, knowing the true value of a product not only saves time and work, but also money. So if you only bought products that are on sale, you would have saved a large part of your income in the long run.

Whether you buy your car for its full price or on sale doesn't change the quality of the car or its features.

Bargain: stocks tick differently

The situation is similar with stocks. Prices can also change when supply and demand shift. It doesn't have to have anything to do with the value of the stock.

More on the subject: The very own laws of supply and demand

Of course, it is an advantage to know in which periods of the calendar year cars are usually sold a lot. In this regard, stocks are less calculable.

On so-called Black Friday you have the opportunity to buy special offers in the USA. This is the day of the bargain. Unlike microwaves and televisions, however, stocks are less predictable when it comes to bargain deals.

5 pillars of value investing

The 5 concepts that will help you find your winning strategy in value investing are:

  1. Shares are difficult to calculate
  2. Keep yourself a margin of safety
  3. The efficient market theory is wrong
  4. Successful investors are not herd animals
  5. Investing requires calm and care

The first strategy has already been illustrated by examples. The margin of safety is an important factor that should not be left out.

If you buy stocks at a cheap price, you have a better chance of making a good profit. By buying a pair of discounted jeans, you reduce your potential for loss.

Whether you buy trousers for € 20 or € 60, the € 20 trousers offer a low price and the chance of being comfortable and of impeccable quality.

Benjamin Graham: The Father of Value Investing

Value investors follow the same pattern. The father of value investing is Benjamin Graham. Graham only bought stocks that were trading for two-thirds of their actual price. His principle: higher profits, less risk.

Investors also don't think much of the efficient market theory. This states that the price of a company share already includes all of the company's information.

More on the subject:How to properly use the value strategy

Rather, value investors use the terms underpriced and overpriced in their strategy. A stock could be sold below value if, for example, the economy weakens and investors empty their portfolios in a panic.

On the flip side, a stock could be valued too high if it is related to a new technology that hasn't yet established itself but is currently experiencing a lot of hype.

It is also important that value investors do not follow the herd. When all other investors are buying, value investors are mostly selling. That said, value investors don't go by the popularity of a stock and dare to invest in companies without big names.

Calm and care extremely important

When buying a share, the value investor thinks back to his basic concern: to buy shares in a company. He is more concerned with the principles of the company than with the hype.

This means that an investor should certainly be calm and careful. Value investing is a long-term strategy. Even in troubled times, it is worth staying calm and keeping your depot tidy. Impulsive actions are rather alien to value investors.

Value investing is a method that also represents an opportunity. Even if there is not something for everyone, the philosophies of value enthusiasts are always exciting.

Perfect for the start of the year: re-balancing Once a year you should bring your depot back into shape by means of re-balancing. The start of a new year is a good time to do so. > read more

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