Value Investing - Is Value Investing A Worthwhile Investing Approach?

Different investment professionals define value investing differently. Some say value investing is the investment philosophy that favors the purchase of stocks that are presently selling at low price-to-book ratios and also have high dividend returns.

Others say value investing is focused on buying stocks with low P/E ratios. You will even often hear that value investing has more to do with the balance sheet than the income statement.

Warren Buffett's concise explanation of "investing" is the greatest definition of value investing there is. Value investing is buying a stock for less than its calculated value.

Tenets of Value Investing

- Each and every share of stock is an ownership interest in the underlying business. A stock isn't just a piece of paper that can be sold at an increased cost on some future date. Stocks symbolize more than just the right to obtain future cash distributions from the company.

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Economically, each stock is an undivided interest in all company assets (both tangible and intangible), and should to be valued as such.

- A share has an intrinsic value. A stock's intrinsic value comes from the economic value of the underlying company.

- The stock market is inefficient. Value investors do not subscribe to the Efficient Market Hypothesis. They think shares frequently trade hands at prices above or beneath their intrinsic values.

The lack of strength with the US Dollar as well as serious monetary debt encourages growing inflation and a shift towards investments in commodities like precious metals.

Occasionally, the difference between the market cost of a share along with the intrinsic value of that share is wide enough to permit lucrative investments.

- Investing is most intelligent when it's most businesslike. Investors must treat investing with the seriousness and studiousness they treat their chosen profession. An investor must treat the shares he buys and sells as a shopkeeper would treat the merchandise he deals in.

You'll find risks involved in all investing. The skill of trading is figuring out which risks are really worth taking, and which need to be avoided.

- A true investment needs a margin of safety. A margin of safety may well be provided by a firm's working capital position, previous earnings performance, land assets, economic goodwill, or (most commonly) a mixture of some or all of the above.

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The margin of safety is manifested in the difference between the quoted cost and the intrinsic value of the company. This may change if the company is being restructured.

What Value Investing Isn't

Value investing is buying a stock for less than its calculated worth. Surprisingly, this fact alone separates value investing from most other investment philosophies.

There is certainly a deep feeling that the American dollar is doomed, with growing debt and a devaluing paper currency, a lot of people are now starting to examine the solvency of the nation itself. Meanwhile Asian countries continue to prosper placing increased load on the value of the dollar.

For info on this subject, http://artfieldinvestmentsrdinc.info/blog/corporate-restructuring/ is a superb web site to visit if you are just starting out.

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