Why Does Value Investing Rock? – The Series
Posted on | December 21, 2009 | No Comments
As part of a new series of Posts I am going to discuss why Value Investing is my preferred investment philosophy (although I have been known to stray now and then). I am going to sum up some of the most important studies that demonstrate why these theories are better than other strategies, in the long term. This does not mean that Uncle Homer didn’t make a killing buying Apple at $12 and selling it over $200. There will always be exceptions. But who wants to be an exception? I would rather have sound trading strategies on my side and not just luck. Although I will take good luck any time I can get it.
Each of the ideas will be discussed and the pertinent studies that support the various value investing techniques will be dumbed down so I can understand them. Like anything in value investing it all started with Ben Graham. When Graham described the investing world in his book Security Analysis, he divided it into two groups, speculators and investors. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.“
That was the beginning of Value Investing as we know it. Next we will start with Low price to Book value stocks and why you should look at them.
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