Investing in Stocks: What You Need to Know Before You Start Value Investing

For business owners or individuals with excess funds, investing in stocks is often a better option than keeping cash in the bank. With this in mind, there are various investment strategies available which can enable you to obtain the best stocks to provide the highest returns.

One such investment strategy is value investing. This philosophy involves you buying shares that are trading at less than their intrinsic value. There could be many different reasons why the stock price may be less than the intrinsic value. Perhaps a temporary hiccup in the business caused a reaction in the market that was more than deserved. In other cases, there may be real competitive pressures that you may believe the company will overcome, but the market may not carry the same belief. In other cases, you may have a better insight in the business or the valuation than the rest of the market. No matter the reason, the outcome is that you are able to buy the stock at a discount to the correct value, and you are convinced that the market will eventually realize its mistake and increase the stock valuation thus handing you the profit.

With this strategy, it may appear that you’re making money due to the impatience of fellow investors. The trick is to estimate a stock’s intrinsic value before buying. However, this is…