WiserAdvisor – Blog

Main Menu

  • Home
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Estate Planning
  • More
    • Personal Finance
    • Portfolio Management
    • Financial Trends/Government

logo

Header Banner

WiserAdvisor – Blog

  • Home
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Estate Planning
  • More
    • Personal Finance
    • Portfolio Management
    • Financial Trends/Government
Financial Planning
Home›Financial Planning›7 Things that Make Value Investing Successful in the Long Run

7 Things that Make Value Investing Successful in the Long Run

By WiserAdvisor Insights
September 24, 2020
252
0
Share:
Investing Successful in the Long Run

Last Modified on September 24, 2020

There are two types of stocks, growth and value stocks. The former are stocks that offer a growth rate above the average, while value stocks are undervalued stocks. Surprisingly, value investing is an often ignored area of investing that not many individuals like to venture into. By definition, value investing refers to purchasing stocks when are they are below their actual value and holding them for the long run. Value investing is a lot like buying something at a discount. However, there is still a lot of skepticism and hesitance surrounding it. So, before you decide to invest in value stocks, you must know what makes these stocks a profitable option.

Here are 7 things that can make value investing successful in the long run:

1. Keeps the financial anxiety out

The fear of fluctuating prices can be a cause of worry for many people. Value stocks are undervalued at the time of purchase but they are built to perform better in the long-term. Many investors commit the mistake of selling their stocks at the slightest shift in the market. But it is essential to hold your stocks for a relatively larger time frame. Keep in mind that the market will continue to fluctuate but this should not be a reason to panic.

2. Does not require active and aggressive investment practices

Since the stocks are bought at a low price, value investing requires very little capital to begin with. You can start investing in value stocks at a very early stage in your career. This also allows more time for the power of compounding. Moreover, since this is a long-term investment approach, you do not have to be bothered by short-term market volatility. Value stocks are a simple form of investing that need little to no intervention. However, it is important to know that value stocks are ideal for goals set in the future. If you are investing in such stocks with the intention to cover immediate or mid-term goals, this approach will likely fail. One of the most necessary virtues of a value investor is patience.

3. Works on the principle of the margin of safety

The margin of safety refers to the difference between the actual or intrinsic price of a stock and the price at which you buy it. For instance, if a stock’s current cost is $5 and its intrinsic value was $7, the margin of safety for this stock is $2. The higher the margin, the more beneficial is the investment. As a value investor, it is crucial to find and put your money into companies that offer a good margin of safety. It is also vital to differentiate between a company that shows potential in the long run and one that is simply showing signs of downfall. It can help to conduct thorough research and understand the past and current financial standing of the company before buying any stocks. You must focus on the company’s long-term plans too. You can also consult a financial advisor in this regard.

4. Focuses on the business and not the stock

One of the primary factors that make value investing successful is that it is centered on the business rather than the stock. Value stocks are relatively unphased by the happenings of the stock market. The returns from your investment will depend largely on the performance of the company. While you may find looking up companies a time-consuming process at first, you will end up saving a lot of time that is otherwise spent on buying and selling of shares in the stock market.

5. Does not require diversification

While most other forms of investing stress upon the need for diversification, value investing is a little different. Opportunities for value investing do not come by as quickly as others. On most occasions, you will invest in value stocks and have to wait several years for the power of compounding to generate good returns. Hence, financial experts suggest buying large amounts of undervalued stocks at once, even if they are of the same company. While this may be seen as a high-risk move in traditional investing, it is usually encouraged in value investing.

6. Dwells on the reputation of a company

Unlike the share market, value stocks are more driven by the management of a company rather than other market forces. Finding a company with a competent team of managers can be a foolproof way for you to ensure favorable returns later. Understanding a company’s core principles, management styles, and credibility can enable more successful investment decisions.

7. Offers low risk and costs

Value investing is a relatively low-risk strategy. Value stocks are not impacted by price fluctuations, supply, or demand. The need to time the market and buy and sell stocks frequently is also removed from the equation, thereby reducing the overall risk component. Moreover, the taxes and costs incurred in value investing are also a lot less than short-term investing.

To sum it up

Value investing is a great strategy for passive investors who do not have the time and interest to time the market periodically. They require very little attention and you only need to look at the market when you buy and sell them. All other fluctuations will have no consequence on your returns.

In order to know more about value investing, you can reach out to a financial advisor.

TagsBusinessDiversificationfinancial planningInvestmentRiskStock
Previous Article

Re-examining Bonds in Today’s Low Interest Rate ...

Next Article

Importance of Investing Acumen for a Secure ...

0
Shares
  • 0
  • +
  • 0
  • 0
  • 0
  • 0
WiserAdvisor Insights

WiserAdvisor Insights

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. We believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.

Related articles More from author

  • Market-Timings-of-Investment
    Portfolio Management

    5 Reasons Why Market Timing is Controversial

    February 11, 2020
    By WiserAdvisor Insights
  • 6 Important Financial Instruments to Make Your Financial Plan a Success
    Financial Planning

    6 Important Financial Instruments to Make Your Financial Plan a Success

    October 23, 2020
    By WiserAdvisor Insights
  • Student-Debt
    Education Planning

    The Treacherous Mountain of Student Debt: Things Every Parent Must Know

    October 20, 2019
    By WiserAdvisor Insights
  • liquid net worth
    Portfolio Management

    What is Liquid Net Worth and How Can You Calculate It?

    March 12, 2020
    By WiserAdvisor Insights
  • Financial-Goal
    Financial Planning

    All About Setting Financial Goals

    November 22, 2019
    By WiserAdvisor Insights
  • Trust-based-Estate-Plan
    Estate Planning

    6 Things to Know About A Trust-Based Estate Plan

    January 7, 2020
    By WiserAdvisor Insights

You might be interested

  • Free Savings for College
    Education Planning

    Hassle-Free Saving For College

  • Portfolio Assumptions That Can Harm Your Financial Planning
    Financial Planning

    Portfolio Assumptions That Can Harm Your Financial Planning

  • The Effect of a 529 Plan on Financial Aid
    Education Planning

    The Effect of a 529 Plan on Financial Aid

  • Popular Posts

  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019
  • financial planning DIY-Checklist

    How to Prepare an Annual Financial Plan – Financial Planning DIY Checklist

    By WiserAdvisor Insights
    June 10, 2019
  • IRAs-Work-401

    How IRAs work? 401k vs IRA

    By WiserAdvisor Insights
    July 4, 2019
  • Retirement-Planning

    Retirement Planning checklist

    By WiserAdvisor Insights
    July 8, 2019
  • Financial-Advisor

    Why and When do you need a Financial Advisor?

    By WiserAdvisor Insights
    July 8, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • monitor your financial advisor

    How to monitor the activities of your Financial Advisor?

    By WiserAdvisor Insights
    July 16, 2019

Don't miss out! Get our Helpful Financial Tips Newsletter

Categories

  • Business Finance (2)
  • Education Planning (23)
  • Estate Planning (16)
  • Financial Advisor Guide (14)
  • Financial Planning (92)
  • Financial Trends/Government (2)
  • Personal Finance (8)
  • Portfolio Management (36)
  • Retirement Healthcare (1)
  • Retirement Planning (66)

WiserAdvisor is America’s oldest and largest independent network of screened financial advisors. We make it easy and convenient for consumers to find and connect with advisors in their area. We have successfully helped over 100,000+ individuals find their best financial advisor since 1998 with no match fees, no commitments, no obligation, and complete confidentiality. WiserAdvisor has been featured in The Washington Post, The Washington Journal, ABC, CBS, Yahoo and has been seen in numerous other leading financial news and information websites.

Follow Us

  • Recent

  • Popular

  • Financial Habits

    5 Healthy Financial Habits You Need to Practice This Year

    By WiserAdvisor Insights
    January 25, 2021
  • Retirement

    Should Your Portfolio Become More Conservative as You Approach Retirement?

    By WiserAdvisor Insights
    January 22, 2021
  • ETFs

    7 Reasons Why ETFs Are Getting Popular Among Investors

    By WiserAdvisor Insights
    January 21, 2021
  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019
  • financial planning DIY-Checklist

    How to Prepare an Annual Financial Plan – Financial Planning DIY Checklist

    By WiserAdvisor Insights
    June 10, 2019

Contact Us

Corporate Headquarters

12150 Monument Drive, Suite 400
Fairfax, VA, 22033

Business Hours

8:30 AM – 5:00 PM EST (Monday – Friday)

Email Address

wa.assistance@wiseradvisor.com

Phone Number

(703) 651-2060

Fax Number

(703) 259-4487

  • Privacy Policy
  • Terms & Conditions
© Copyright 2019 WiserAdvisor.com. All Rights Reserved.

Add WiserAdvisor - Blog to your Homescreen!

Add