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THE GUIDE TO VALUE INVESTING (Part-1)

What is value investing?

The collection of the most profitable businesses in the world is investing whereas value investing advocates buying good and profitable business at sensible prices.

People don’t make money from the stock market because they buy it at overvalued prices, by studying and analyzing the market, you would be able to determine a stock’s ‘real’ price. Identifying and buying stocks below their value is the essence of value investing.


Generating stock ideas

Some of the key features of best value stocks are-

● Profitable businesses, lots of loyal customers, always ahead of trends, market leader and good growth potential.


Where could we find businesses that possess them?

1. Visit shopping malls to see which shops have a lot of customers.

2. Observe what items you have to buy on a regular basis and determine which companies you will buy them from.

3. Google the companies with top rated brands.

4. Check out what seasoned investors are investing in.

5. Use investment screeners.


Circle of competence


Some questions are listed below to ask yourself to know your circle of competence:

● What do you love doing?

● Where do you earn/spend money?

● What are you good at?


If we try to be good at everything, it is likely that we will end up being mediocre at many things.

There should be at least three areas or segments in which you are truly interested in.


Best companies

It is always a good idea to invest in companies where the employees are happy.


Tip: Visit Fortune or Glassdoor for the list of such companies. They rank companies based on employee satisfaction annually.


Shopping malls


Find businesses you are a customer of. Find stocks on main street rather than wall street.


Tip: Go to financial websites to see if they have the kind of quality that you would want to invest in.


Financial websites

Websites to use for finding stock ideas.Yahoo! Finance (http://finance.yahoo.com/)

It publishes news quickly. Go to the site to read about news currently in the spotlight.

We have to find companies that have gotten into some temporary trouble that will not affect their business models, and buy shares of these companies when they become undervalued.

When there is news which affects a company negatively, its stock price will most likely fall because people tend to overreact.



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