Value investing focuses on buying stocks that appear to be undervalued by the market. The core idea is to invest in companies trading below their intrinsic value, then wait patiently for their true worth to be recognized.
This strategy involves deep analysis of company fundamentals - such as earnings, revenue, dividends, and book value - to determine what a business is truly worth. When the market undervalues a strong company due to temporary conditions, a value investor sees an opportunity.
Patience is key. It may take months or years for the market to correct itself. Unlike traders, value investors often hold positions long-term and ignore short-term price fluctuations.
Value investing is ideal for long-term investors who prefer a thoughtful, analytical approach. If you're comfortable doing research and have the patience to wait out the market, this strategy can be both rewarding and relatively low-risk.
Buffett built his fortune using value principles - focusing on high-quality businesses trading below their true value and holding them for decades.
Want to dive deeper into the theory behind value investing? Check out this
Investopedia article on value investing