For a long, long time, I struggled to understand what value investing means?
Investing is investing, after all. What is the point in giving these tags of growth investing, value investing, evidence based investing, etc. etc.?
And yet, some of the foremost investors in the world practise and preach value investing.
Mutual funds such as ICICI Pru Value Discovery Fund and Quantum Long Term Equity Value Fund also claim to follow this style. If I might add, even the Parag Parikh Flexicap Fund.
What differentiates value investing from all other types?
I think the one big thing that stands out for value investing is the focus on NOT losing money, permanently.
Yes, invest to build wealth – but without unnecessary risks – that can threaten the safety of your capital.
It means – avoid big mistakes – like overpaying for a stock or buying a company with a shady corporate governance or a fund that changes its style with the season or anything that you don’t understand.
It also means – stay away from opportunities that could be ‘wolf in sheep’s clothing’ – penny stocks or companies with high debt.
Anything else including whatever sounds too good to be true.
That’s it.
You protect your downside as much as possible and the upside will take care of itself. If you survive, you thrive.
Let me put it another way – Value investing doesn’t make you lose sleep. It enables building wealth with focus and patience, over a long time.
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What does value investing mean to you? Do share.
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