A Guide to Value Investing Strategies

Planning of finances can be in such a way that the immediate and long-term financial needs are met. Investment planning is a key component of financial planning. Investments will ensure wealth growth and income generation. After you retire, you will not have a regular salary but you will have monetary needs. Therefore it is important to have financial stability in life.  It is easier to meet other challenges in life if the financial aspect is taken care of. There are a variety of investment options in India like equity, mutual funds, bonds, PPF etc but here are few lesser known options:

The main motive of an investor is to create long term value portfolio. Since we only get good returns after a period of time and therefore creating a value portfolio requires proper research. Some people are more akin on gambling rather than investing. It uses the portfolio to analyze stocks like a value investing investor.

The first question we come across is what is value investing?

Value investing is a style of investing whose main creed is to look out for stocks that priced under the intrinsic values. Along with a minimalist risk factor and buy them. The main still remains same in here that is to buy at a low and sell at a high price leading to better capital gains. But it is more comprehensive approach as it also means to determine the precise low at which you will buy the stocks based on the fundamentals. Entering the market is basically dependent on the timing.

Inspection of the intrinsic value:

Finding the intrinsic value of the company by the investor depends on his preference. Therefore the calculation differs as well from investor to investor. Some investors might consider the cash flows and some investors would only consider the financial situations such as the assets and liabilities of the company. Hence it’s a subjective personal preference to choose the type but the style would in the end give out an intrinsic value. Or at what the company’s current worth is without any premium.

Few points for value investing include:

• Wait for the buy-in-point in order to stay invested for a long time. It is fine to have no buy-in-point if your criteria are strict if there is nothing fitting your criteria.
• There might be times when you won’t follow the herd for investment decisions. Go exactly opposite which is fine as well if the criteria matches with the investment plan.
• There should be a margin of safety kept which is a discount % on the intrinsic value for example if the value of the stock is Rs.100 and safety margin is 20% then one would buy the stock at Rs.80 which is a safety margin to safeguard from more losses.
• One other factor is to look at the management of the company instead of the performance. Since it also gives a future flow of the company and invest in the companies you understand about.

Note for the investors:

Investing is a strange mix but whatever strategy to adopt it will always boil down to investor avoiding unnecessary trading. It has long term holding period for better returns on the basis of intrinsic value.

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