How To Make Your Money Work For YOU: 101 Value Investing Strategy

“How much time do you spend on investing in the stock market?”

 

People who know that I chose to manage my retirement funds myself  ask me this question often. My answer: a couple of hours a week the most, sometimes a couple of hours a month, depending on the stock market condition. I believe that many people feel that stock market investing requires significant daily time investment. This misconception comes from mistaking an idea of INVESTING with TRADING.

 

I’ve known a few day-traders…These are men and women who buy and sell various stock market instruments (stocks, futures, currencies, options, etc.) within few minutes or hours using the price spread fluctuation of a particular instrument within a short period of time. To the best of my knowledge, none of them were able to accumulate significant wealth… I am not saying it’s totally impossible but it has not been my experience and, therefore, it’s not the investment philosophy that I subscribe to or practice.

 

I like to have a separate stock portfolio for Value investing and Growth Investing.

Value Investing is investing in the stocks (a.k.a. businesses) that have long and consistent history of good performance and paying consistent dividends to their shareholders, which means they will likely survive and thrive over a long period of time.

Growth Investing is investing in rapidly growing, promising yet more risky companies that have yet to establish their long-term record of being consistent with profits and paying dividends.

 

Value investing is most appropriate for your long term investments (e.g. retirement funds, especially in a tax free retirement accounts like ROTH IRA.)

 

Value investing became somewhat controversial because it is often the ‘buy and hold’ investing that some consider an ‘old school’. But it works very well for me. The name Value Investing comes from the idea that stocks have intrinsic value based on the qualities and financial properties of the companies. And the market price of those stocks can be above or below their true intrinsic values. Thus, the goal of Value Investing Strategy is to buy stocks when their price is lower than their intrinsic value. That simple.

 

Benjamin Graham, the father of Value Investing, called it the ‘margin of safety.’ In other words, even if the price of the value will drop temporarily, you can sleep well at night knowing that what you paid for it is below its intrinsic value, so you will not go ‘under water’ with a temporary price drop.

 

One of the most famous and successful value investors of all time is Warren Buffett.

When he operated his partnership, before taking over Berkshire Hathaway, he used to earn 29.5% annualized returns from 1957–1969. It has been my experience that Value Investing provides better return in the long term than Growth Investing.

 

I like to say that “You make money when you buy.”

 

Just like with real estate purchases, if you buy a property in a good, in demand, geographical area at a price that is lower than the property’s intrinsic value, you won’t lose sleep over temporary decline of its market price. Similarly, if you are a value shopper, you would buy your organic veggies when they are offered at discounted price due to seasonal promotions or higher supply. And sometimes, when you see good value in some purchase, you may buy twice more for the same cost. Agree?

 

Is it easy to find a candidate for Value Investing? No, not often. Like any stock investing strategy, there is some risk involved. The ideal for a value investor is to buy strong but

undervalued companies. In those situations, the low stock price doesn’t reflect the true value of the underlying assets of the company.

 

There is only a handful of great companies that fit my criteria of Value Investing. But patience is one of the most important virtues of good investors.

 

Do you want to know how I do it?

 

OK, I’ll share with you my ‘secret’!

 

Here it is:

 

  1. I do my own research using the research tools available through the brokerage companies I hold my accounts at.
  2. I outsource the research by subscribing to investing newsletters that I tested and came to trust over a period of time. Most of them recommend a particular company stock, provide an essay to support its value and buy-up-to price, so you will not overpay for it.
  3. I am selective, I don’t follow all recommendations blindly; I check which stocks feel right for me – my portfolio goals, my investment values and time horizon.

 

This strategy works for me, doesn’t take too much time and allows me to have a good diversification of my retirement assets.

 

What do you do to invest and diversify your money? What is your favorite strategy to secure your financial future?

 

Would love to hear from you!

 

Until then… Think and Live Wealthy!

 

 

Millen

P.S.  If you have money sitting in your bank account that doesn’t work for YOU, schedule a Complimentary Money Breakthrough Strategy session with me!

About the Author Millen Livis

Millen is a Wealth architect and Financial Independence Coach, entrepreneur, and a bestselling author. Being a Possibilities’ Catalyst, she uses her intuition, business, and investment expertise to support entrepreneurial women (like you) who want to master their money, live their purpose achieve financial prosperity and freedom. With her physics and business education, corporate and entrepreneurial experience, money management know-how, mindfulness practices and transformational coaching skills, Millen has a unique ability to guide and support clients in achieving extraordinary success in their lives.

Leave a Comment:

6 comments
Add Your Reply