If you had the choice between paying full price, over paying or getting a discount, which you would choose? A sane person would take the discount. The shopping habit of actively searching for deals, bargain hunting is the basic idea behind a value investing strategy. Seriously, who doesn’t like a discount?
Most people like the idea of buying things for less. So why don’t more people use the same strategy when it comes to investing?
Understand, shopping for food and cloths is not the same as shopping for stocks. A store buys products from the manufacturer with the hope of selling it at the regular price. Sometimes the store buys too much and is forced to have a sale to get rid of the extra inventory.
With stocks, before you can buy, someone must be willing to sell their shares first. And sell them at a price you’re willing to pay. Of course with this type of market place, someone is always the greater fool. Either selling to low or buying too high. Value investing looks to take advantage of this. Continue Reading…