Investors are often looking for ways to beat the market. If you’re one of those investors, you should consider following a proven strategy that has been implemented by the investment greats. Value investors figured out how to beat the average annualized returns of the S&P 500 a long time ago, and many have successful track records spanning several decades to prove it. The most famous value investor, of course, is Warren Buffett, but there are many others, including Benjamin Graham, David Dodd, Charlie Munger, Christopher Browne and Seth Klarman.
If you’re an avid sale shopper, you already have some of the most important skills a value investor needs. You know that the time to buy a 12 pack of soda is not when it’s regularly priced at $6. Perhaps the soda is, in fact, worth $6, but you know that if you wait for the right opportunity you can get it for less. The right time to buy soda is not even when it is on sale for $4. No, you want to wait until the soda sales cycle hits a low and you can purchase a 12 pack for just $2. Then, you’ll buy enough soda to last you several months, or maybe even the whole year. You’ll be getting a $6 value for just $2.
Apply this idea to stocks and you have value investing, plain and simple. Any time you buy a stock, you want its intrinsic value to be higher than its market price. If you have the right temperament and you’re willing to put in the effort, you can learn how to successfully invest in individual stocks using value investing techniques. This tutorial will help you get started. (To learn more, refer to The Value Investor’s Handbook.)