You can use many strategies to invest your money, and one of the most popular ways is to invest in the stock market is value investing. But, the meteoric rise of tech stocks in the recent years has led many to question the existence on value investing as an investment practice. So, is value investing outdated, or is it still relevant?
Value investing has been around for a long time, and it’s still relevant in today’s market. It takes a lot of work and patience to use value investing, but it can lead to big payoffs if you buy the right stocks. To be effective at value investing, you will need to educate yourself first.
Value investing can be a great addition to your investment toolbox in today’s market if you do it right. This article will break down what value investing is, why it is still relevant, and why some people think it is outdated. Then, we will talk about the ways you can learn about value investing and how to get started doing it.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
What Is Value Investing?
Value investing is a type of stock trading where you buy undervalued stocks—those that you think are selling below their actual worth. Since you think they are selling at a low price, you will be buying them at a value, hence the name.
Value investors consider the intrinsic value and will purchase the stock when the price falls below the intrinsic value.
Since there is no common way to determine a stock’s value, you need to come up with a system to identify stocks selling at a value price. Unlike a Black Friday sale or a clearance rack at the mall, stocks do not have a set price that goes down when they are on sale.
To determine a stock’s value, you can look at factors like the change in price over time, future price predictions, and a company’s upcoming events that may impact the stock price. You can sift through the company’s financial records and public information, like their Form 10-K or annual reports and any stockholder releases.
Value investing has been around for over a century, and it is one big reason that popular investor Warren Buffett is so wealthy today. Once you learn how to value, invest and start finding the right value stocks, you can make large profits.
Watch this Youtube video from Preston Pysh, to learn more about value investing and who can benefit from it:
Why Do Some People Consider Value Investing Outdated?
When people first started investing in stocks, they did not consider the value of stocks relative to the price. They would just buy what they thought was a low price, and what they thought would increase over time.
Then, value investing gained popularity in the 1920s with Benjamin Graham, an economist, and investor. He used his knowledge of the stock market to speculate what direction stock prices will go.
Since value investing is more than a century old, many people consider it outdated. However, it is not since stock prices are always changing, and therefore there are always undervalued stocks, even if they are difficult to find.
Furthermore, stock prices have been changing, and not always in a good way, over the past few years. The pandemic alone created a lot of uncertainty in the stock market, and value stocks were hard to find. However, as the economy bounces back in the coming years, so will the stock market and value investing.
Finally, some people consider value investing outdated because it is not a quick, fast way to invest like many people are used to now. Many people like to be able to look at the stock numbers and trade instantly.
There are easy ways to invest your money, such as hiring someone to invest your money for you. While having someone else manage your portfolio may be easier than value investing today, it does not mean that value investing is dead.
Since value trading takes time and patience, it turns many people away from it without a second thought. This type of investing is out of many people’s comfort zones, and instead of trying to benefit from it, they dismiss it.
Why Is Value Investing Still Relevant?
While value investing is not outdated, there are a lot fewer people participating in value investing. There are a few reasons why there is a decline in value investing.
First, value investing takes a lot of time and effort. If the value stocks were easy to find and buy, everyone would do it, meaning stock prices would drastically increase, and therefore, there would be no more value stocks.
If you want to start value investing, you need to put time and effort into your value stock searching. You will also need to educate yourself on the stock market, stock price trends, and what is considered a value stock.
As a value investor, you will need to put more time into determining which stocks will be worth your money, depending on your goals and how long you hope to hold the stock.
While it may be tempting to stick to a certain type of stock, be sure to keep your portfolio diversified like you would with any other type of stock or investment.
As discussed above, recent economic events, including the pandemic, have had a significant impact on the stock market. With the ever-changing prices on the market, some of which are much different than they were pre-pandemic, value stocks will always be on the market.
It is up to you to take advantage of these fluctuating prices and find the value stocks that can help you and your portfolio profit.
If anything, value investing is now easier than ever since we have the internet and financial news channels to keep us updated on the stock market. With information always at our fingertips, anyone can learn about and start value investing if they are willing to put in the effort.
Learn More About Value Investing
Value investing is different from other types of investments since it is very hands-on. You will need to find and research stocks to determine which ones you can purchase as value stocks. If you want to learn more about value investing, here are some great books to get you started:
- The 8-Step Beginner’s Guide to Value Investing: This is a book that will help you avoid beginner mistakes. It will lay out the steps that you should follow when valuing stocks and some examples of great stocks to buy and why.
- Modern Value Investing: This is a book that proves that value investing is still relevant in today’s market. It includes traits that every successful investor should have, 25 tools to help you analyze an investment, how to apply these tools, and modern approaches to investing.
- The Intelligent Investor: The Definitive Book on Value Investing: This was written by original value investor Benjamin Graham. The book was first published in 1949, but it has been updated to match current market conditions. You will learn all about value investing and how it started while also learning how the market and investing have changed over the last century.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
Many people think value investing is outdated, but it is still relevant even though its methods have changed. To buy value investments, you will need to put in time and effort into finding the right stocks for you.
Make sure you know enough about value investing before you start. Having the right knowledge and strategies, along with time and determination, will make value investing worth your time.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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