Value investing is a way of buying stocks that are undervalued or “on sale” in the market. These are shares that are worth more than their current price, but the market hasn’t realized it yet.
Think of it like this:
You find a branded shirt worth ₹2,000 being sold for ₹1,200 during a sale. You know the real value, so you buy it now and benefit later.
Value investing does the same thing with stocks.
Core Idea of Value Investing
Buy stocks at a discount to their true value and wait patiently for the market to recognize that value. When the stock price rises to match its real worth, you earn a profit.
How Does Value Investing Work?
Step 1: Find Undervalued Stocks
Look for companies that are:
- Profitable and stable
- Trading at a lower price compared to their real value
- Temporarily ignored or undervalued by the market
These are often called “hidden gems”.
Step 2: Analyze the Company
Check things like:
- Earnings per share (EPS)
- Price-to-Earnings (P/E) ratio
- Debt levels
- Business model
- Future growth potential
The goal is to find strong businesses with a solid future.
Step 3: Buy and Hold
Once you find a good undervalued stock, buy it and hold for the long term — sometimes for years.
Patience is key. Value investors don’t try to make quick money.
Famous Value Investors
- Warren Buffett – One of the richest people in the world, known for using value investing
- Benjamin Graham – The “father” of value investing and Buffett’s mentor
Real-Life Example:
Imagine a company called “Sunrise Foods” is trading at ₹100 per share.
After research, you find it’s actually worth ₹150 per share based on profits, assets, and brand value.
You buy 100 shares at ₹100 = ₹10,000
After 2 years, the market realizes its value, and the stock rises to ₹150
Your 100 shares are now worth ₹15,000
You earn a ₹5,000 profit just by being smart and patient!
Benefits of Value Investing
- Lower risk if done properly
- High potential for long-term gains
- Focus on real business value, not just market hype
- Works well in both good and bad market times
Risks of Value Investing
- Takes time to show results
- Needs research and patience
- The stock might stay undervalued for long
- Company risks (like fraud, bad management) still apply
Who Should Try Value Investing?
- People who want to build wealth slowly and safely
- Long-term investors
- Those willing to learn about companies
- People who don’t panic when markets go up and down
Conclusion
Value investing is like smart shopping for stocks. You buy quality companies when they’re cheap and wait for their true value to shine. It’s a proven way to grow wealth — slow and steady — just like the turtle in the race.
