Value Investing guide for Beginner

Himanshu Sachan 4 Nov 2020 . 2 min read

After reading books and watching few videos, I marked out few good points which you need to consider as a Value Investor. Being a Value Investor you need to understand that you are not just buying the share of a company rather you are going to own some part of that company. So, before investing your hard earned money on any company it is appreciable if you perform your own analysis.

Let me give you a detailed explanation for the same. Before we start let me tell you what value investing is? So in value Investing you a pick a stock which is trading below its Intrinsic value and sell it when stock become overvalued. This is a very simple definition of value Investing. So now I am going to tell you what are the steps you need to take as a value Investor:

Find a fundamentally strong stock
Buy when it is undervalued.
Sell the stock when it becomes over-valued

These are three simple steps one should follow as a value Investor. Now I am going to tell you some principles of the Value investing which you need to focus on: -

Before you go for stock selection, or anything related to value Investing, you should be compatible with the insights of that thing.
Find out those companies which are cash rich, means those company which has enough cash to pay their debt.
Search for those companies which have minimal debt or Zero debt
Do EIC analysis know as Economic-Industry-Company analysis
Check for the promoter details and their history and know what is their worth for the company means always rely on High Quality Management
Avoiding loss should be your first priority. Example: let me give you an interesting ex: If a stock falls by 20% and then it recovers back by 20%, In this case you are still in loss
Focus on long term capital gain, means always consider for long term investment
Always know when to exit or when to sell off

These are principles of the value Investing. There is one famous quote by warren buffet that says, “Price is what you pay, and value what you get,”

So always remember these points as value Investor. At the end I would like to say this again that you are not buying the shares of the company, you are buying a part of the company or you are becoming the partner of the company. So analyze the company carefully and invest safe.