If you frequent finance blogs or read investment articles, I’m sure you would have come across the concept of value investing more than once. Ever wonder why everyone’s touting it as one of the most reliable and stable forms of investing? Here are 5 reasons for you to pick it up if the thought has ever crossed your mind.
1) The Richest Investor In The World Made His Wealth Through Value Investing
Warren Buffett is currently the world’s richest investor with his $58.2 billion net-worth at the time of writing. And he earned it all through value investing, the investing methodology handed down to him by Benjamin Graham, his professor at Columbia Business School.
It’s worth noticing that Buffett didn’t just scrap into the richest investor position, he cemented himself there miles ahead of his next competitor Michael Bloomberg, at second position with $33 billion. Can you picture even it? The world’s richest investor is almost twice as rich as his number two! If value investing is what got him there, then I want a piece of it too!
2) It’s Actually One Of Those Investment Methodology That Actively Involves Lessening Your Risks
Investing is supposed to be risky, right? Not if you’re doing it through value investing. Unlike momentum investing, value investing requires people to buy good stocks at low prices. Since you are paying a low price for a stock, it is less risky since your outlay is less as compared to when you buy the stock at a high price.
This may seem a bit counter intuitive for market chasers as they normally shun stocks have fallen and snap up those on the climb. However, value investors don’t see it this way. They see these falling stocks prices as discounts opportunities and liken a recession to the Great Singapore Sale – it’s a great time to shop!
3) Anyone Can Pick Up Value Investing And Utilize It, If You Follow The Principles Accordingly
The best news about value investing is that anyone can utilize its principles to make money for themselves. I don’t think you will have the chance to be the next Bill Gates, but anyone can be the next Warren Buffett if they stick to the value investing principles that were handled down by Benjamin Graham.
Many of Benjamin Graham’s students like William J. Ruane, Irving Kahn and Charles Brandes were also went to become successful investors, even though they might not be a household name like Warren Buffett. Roger Murray, the following professor taught value investing after Benjamin Graham, also produced another famous value investor by the name of Mario Gabelli.
What this means for you is that if you school yourself in the timeless money making principles of value investing, it is highly possible that you can be among one of the great investors as well!
4) It Has Been Tested By Recessions, Tech Bubbles & Wars
While tech funds and momentum trading have come and gone, the value investing methodology has withstood the test of time. Warren Buffett himself has gone through two world wars, countless economic recession, survived the dot-com bubble in 2001 and went through the subprime crisis in 2008. However, he has come out richer after every crisis. Now, that’s close to 50 years of positive investment track record!
5) You Have Two Of The Greatest Assets On Your Side – Time & Compound Interest
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein
Such is the power of compound interest that physics genius, Albert Einstein declares it as the 8th wonder of the world. Your money need time to grow just like how a baby takes nine months to conceive. Clearly, the genius investor Warren Buffett understood also this in his own witty ways.
“You can’t produce a baby in one month by getting nine women pregnant.” – Warren Buffett
Hence if you want to start growing your financial baby, it would be wise of you to pick up value investing. You might just be the next billionaire! Image Credits: blackdreamer.com