Value Stock Investing
Value Investing and Dividend Paying Stocks
What Is Value Investing?
Value investing is the selection of stocks that are priced less than their intrinsic values. Value investors are looking for stocks of companies that they think the market has undervalued. Markets overreact to good and bad news especailly in uncertain times resulting in stock price movements that do not aligned with the company's long-term fundamentals. The result is an opportunity for value investors to profit by investing when the prices are deflated. Mostly value investors use lower than average price-to-book or price-to-earnings ratios, and/or high dividend yields to purchase stocks.
Forecasting intrinsic value is very subjective. Finding and defining intrinsic value is not the same for everyone. Buy buying hopefully at low enough prices, in case the price goes lower, it won't be as severe to allow you to hold short-term to gain the long-term return.
Value Investing and the Difference Between Big and Small Investors
Millionaire and billionaire investors have the ability to ride out longer and deeper downtrends or bear markets in asset prices where as small investors and traders cannot so easily without losing their entire account equity. If your not one of these types of investors traders, then you should be highly considering and using stop-loss to cut your losses when they are still small and preserve your investing trading capital. Your stop-loss will depend upon how much money you can afford to lose, leverage, and other factors. Allowing for a stop-loss of 8% average for DJIA and S&P500 stocks to 15% to 20% for Nasdaq and penny stocks is maximum suggested amounts to accept.
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