PostHeaderIcon Reasons why you should use value investing when investing in the stock market – Part 1

“Investing is most intelligent when it is most businesslike” These nine important words probably summarizes in a nutshell the value investing theory.

What is value investing and why do I insist that it is the best strategy to use when investing in the stock market?

The principles of modern value investing were conceived by a Benjamin Graham, known today as the Dean of Wall Street and the father of value investing. Although Graham did not have a name for his stock market investing strategy, it was later on called as “value investing” by his disciples. The core principles of value investing is embodied in Benjamin Graham and David Dodd’s book “Security Analysis” and Graham’s book “The Intelligent Investor.” Both books are widely recognized by stock market experts and regarded as sacred text by value investors worldwide.

I say that the above mentioned quote summarizes the value investing theory in a nutshell, because it the simplest explanation of the value investing concept. Value investing is nothing more but intelligent investing and investing is most intelligent when it is most businesslike. Once a stock market investor approaches stock market investing from a business perspective he will surely make rational and intelligent decisions.

Value investing has taken many forms since its inception and flavors of different types of value investing vary depending on each value investor. However the core concept of buying shares of stock whose shares appear under priced by using some form fundamental analysis remains a key concept regardless of what flavor of value investing is being used. Buying shares below their intrinsic value with a sufficient margin of safety also remains to be a key concept in value investing.

I believe that value investing is the best investing strategy when investing in stocks. Using a value investing strategy will help you survive in the roller coaster ride of the stock market and will help you avoid getting uncessary a Best Offset Mortgage. Let me give you five reasons why I use value investing in stock market investing and why you should become a value investor yourself.

1.) Logical, no-nonsense approach

The value investing approach is the most logical, no nonsense approach in stock market investing and uses a lot of common sense. When you start learning about value investing the first thing that you notice is that it makes lots of sense. No fancy gimmicks and computation and no unnecessary unreasonable risk. I mean think of it, if something you want is worth a dollar and somebody offers to sell it to you for 50 cents wouldn’t you buy it, this as simple as it gets. The value investing concept is similar, find companies that sell for less than how much it is worth and buy tons of shares! This makes a lot of sense right? This is what every businessman would do.

Value investing is simply investing from a business perspective. Benjamin Graham captures the essence of this point in his very own words.” Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate on Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. Yet every corporate security may best be viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise. And if a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success.”

See you next post on Part 2 of the “Reasons why you should use value investing when investing in the stock market”

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Hi ! my name is  Zigfred Diaz, Thanks for visiting my blog where you can learn stock market investing the Warren Buffett way and using other value investing methods ! Never miss a post from this blog. Subscribe to my full feeds for free. Click here to subscribe to The Polymath Investor by Email


2 Responses to “Reasons why you should use value investing when investing in the stock market – Part 1”

  • Aaron says:

    Hi Zig!

    Great article about value investing! :)

    I am a firm believer of this approach and I think this is the only way to invest and stay invested in the stock market with absolute peace of mind.. :)

    On that note, you or your readers might be interested on the “HOW” value investing is done.

    If yes, may I invite you and your readers to UpStart Stock Market Investing Workshop, on October 22, 2011, 8am to 5pm, Cebu City Sports Club.

    For more info, you may click here: http://wp.me/p1tiIQ-bQ

    We will be rolling our sleeves up and start DOING what every stock market investor SHOULD do.

    No more staring on the powerpoint slides, no more just listening to speakers flaunting what they know and what THEY SAY they do.

    We highly encourage interested participants to bring their own laptop so they can apply instantly the learning as they come, and ask questions on the spot!

    The focus is finding the value of the company — what a stock is worth?

    When you know the answer to that, you’ll know at what price to buy, you’ll know at what price to sell, you’ll know how long can you afford to wait.

    The best is, we don’t have to get nervous when the stock market is falling.

    With what we’ll do together in the workshop, we’ll just buy the stock, sit it out regardless of market action, and sell it when the price reach its value! Talk about relaxed investing! :)

    There will be a little discussion on stock charts, they do play a part anyway.

    Thanks for the opportunity to comment on your post and I hope you can help us help other investors and enable them to invest in the stock market with the right perspectives and with the right tools.

    Happy investing! :)

  • Share Tips says:

    Thanks for clearly explaining the value investing theory.

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Hi my name is Zigfred Diaz, the blogger behind The Polymath Investor. I've been investing in the stock market for a while. I hope that my investing ideas might be able to help you make wise investments decisions. Thank you for the visit ! Do feel free to look around.

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D’ Intelligent investor is one of the first few updated value investing blogs in Asia and probably the only updated value investing blog in the Philippines where you can learn stock market investing through intelligent investing that makes business sense. The stock market investing strategies are very different from what most stock market players advocate. The strategies featured here are mainly value investing principles more specifically inclined with what are perceived to be Warren Buffett’s style of investing. Other value investing strategies by great value investors such as Benjamin Graham, Peter Lynch, John Boggle among others are also featured.