One of the things investing newcomers get wrong is taking the concept of value investing for granted and treating it as a religion in the very beginning. Value investing is great only if done seeing different sides of each company’s story – what is the latest innovation one is working on, what are the prospects for the adaptation of a technology, and so on. Assets even like Dogecoin should not ne treated differently than a stock like Bank Of America (BAC).

Value Investing

For most of us, value investing means buying stocks that have underperformed the market. To make the theory simple, we think companies with high free cash flows and low market caps should have low valuations. The principles of value investing are very simple and straightforward. For this reason, many of us have attributed this to Warren Buffet – one of the greatest investors of all times. He is very known for his clear understanding of stock valuation and furthermore, he is one of the few investing minds who acknowledge the importance of quality metrics. The Moneyball Approach: The second approach we will present to you is rooted in behavioral economics. Warren Buffett’s billion-dollar company Berkshire Hathaway (BRK.A) is a great example of this.

The Basics of Stock Investing

Simply put, value investing is the process of buying stocks or securities that offer a higher value than their peers. You will get a clearer picture of this idea if you know the history of value investing, starting with Benjamin Graham and David Dodd’s seminal tome, Security Analysis, and going till Warren Buffett’s most recent sequel, The Intelligent Investor. It is one of the most famous books about investing and it is simple enough to read in an evening. In order to implement value investing properly, you have to define your rules. Before we do that, let’s be clear on how the stock market works. Shares of a public company are some form of ownership of the business the company is involved in.

Why Invest in the Stock Market

So what is a stock? It is a company’s shares (equity). It is the collective ownership in a company, and a form of ownership in a business. Since the current economic environment is changing so fast, investing in a business is more about the possibilities of the next business than the old business. And the main concept of investing is to buy low and sell high, that’s why when you buy a stock, you buy the shares that are priced cheaply, and sell at a relatively higher price. If you just buy the shares that are priced at a very high price, then the price goes up while you are waiting for them to go down and the cost of the shares goes up. After buying the shares at a discount (usually 20%), you must then reinvest the profits from the sale to get the shares at a higher price.

How to Invest in the Stock Market

Dealing with value is important. That being said, being positive on companies can be very rewarding. If you bought one thing (stocks or coins) at a certain price, you will make money over time. Maybe you were wrong, maybe you were right. But being right is just as important. Learning how to buy stocks is one of the best investments you can make. It also helps to have experienced people to guide you: your broker, financial advisor, stock analyst, and so on. They will not only be happy to take your money, they will also do their best to help you avoid any unpleasant surprises. After a period of learning how to buy and sell stocks, it is time to get back to basics and learn how to invest in stocks.


So, if you want to make a living through stock trading, you must learn the theory of value investing, and make sure to distinguish between real assets and stock trading tools. As you invest in stocks, especially small stocks, you must understand the business model and check every asset’s contribution and balance sheet, and understand the growth prospects of the sector and whether the business model works. Investing in small to mid-cap companies requires careful assessment of stocks and business, and you can get better with experience. Any comments?

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