Stock market is a crazy world. Different players enter the market with different time-frame, and with different intentions. Some look for quick bucks, and would cash on the market momentum, totally ignoring the market and stock fundamentals, while for some it is a casino, where they would make or lose money as if by a flip of coin, these people usually day-trade, as they look for quick results. Then there is a small, albeit committed tribe of value investors, who would invest only when they find that a share is being traded at a price below its intrinsic value.

Value investors believe that the efficient market hypothesis is not valid, and more often than not, there would be a divergence between the real value of a share, and its quoted price. The wining strategy lies in finding the true net worth of a share, and buy a share only if there is, what the great-father of value investing Benjamin Graham referred to as, the Margin of Safety in the deal.

This article is an introduction to the discipline of Value Investing, as developed by Benjamin Graham, and successfully practised by great investors like Warren Buffet, and Peter Lynch. This approach is more scientific than any other approach, and is more suited for the people who can spend time studying and researching, and if you do not have a background of finance, you would do well to read some basic books on understanding the financial statements of companies. This approach requires a detailed knowledge of the financial statements, and an ability to calculate the real net worth of a company.

I have done considerable research on value investment strategy, and would be glad to help you if you need a guidance. You may contact me on tsrawal@tsrawal.com if you have specific queries on this investment methodology, please do not post share-specific queries.