Investing 101: What is value investing?

This image shows a chart where the stock price starts at low and goes up over time, illustrating the definition of value investing.

If you’ve heard of Warren Buffett or read any of his advice, what you may not have known is that he is one of the most well-known investors who have utilized value investing as a strategy.

What is value investing?

Value investing is like shopping for a good deal, but instead of clothes or toys, you’re looking at stocks. Imagine you’re at a store, and you see two similar items – one is on sale for a really low price, and the other is at a regular price.

Which one would you buy? Most people would go for the sale item, right? Well, value investing is kind of like that, but with stocks.

Finding hidden gems

When you’re a value investor, you’re trying to find stocks that might be on sale compared to what they’re really worth. Sometimes, companies might be going through a tough time, and their stock price drops, even if the company is still good. It’s like finding a diamond in the rough – something valuable that others might not notice right away.

How does it work?

Let’s say there’s a company that makes yummy snacks. Their stock price was high before, but recently, it went down because people are worried about a temporary issue.

Value investors would look at this situation and think, “Hey, this company still makes great snacks this problem is fixable. Maybe it’s a good time to buy their stock while it’s cheaper.”

They believe that over time, the stock price will go up, and they can make a profit.

Patience pays off

Value investing is not a get-rich-quick scheme. It’s more like a slow-cooking recipe. You buy the stock at a low price and then wait patiently for it to rise in value over time. Just like growing a plant, it takes time for your investment to grow.

Tips for young investors
  1. Learn about companies: Before you invest, understand what the company does and how it makes money.
  2. Do your research: Look for companies with strong foundations and potential for growth.
  3. Be patient: Investments take time to grow, so don’t expect instant results.
  4. Stay informed: Keep up with news about the company you are interested in and have invested in.
  5. Ask for help: It’s okay to ask adults or experts for advice and guidance.

Remember, value investing is all about finding hidden opportunities and being patient. So, as you learn more about investing, keep value investing strategy in mind. Who knows, you might discover the next big thing while it’s still a hidden gem!

© FataFeat 2023