Growth investment focuses on the fast earning growth of a company and investors might have to pay a premium price to get in on those investments. On the other hand, value investment advocates purchasing stocks that are cheap compared to the intrinsic worth of a company’s earnings. Thus which strategy should an investor adopt in these uncertain times? Continue reading this article to find the best answer to this question.
This strategy works well in a bull-run economy where the market is trending upwards and the momentum of the stocks is sustainable. Stocks that fall under such investment potentials have high price-to-book ratio and high price-earnings ratio.
Value Investing Strategy
The strategy of value investing in Singapore works well when an investor adopts a long run perspective in an uncertain bear market. According to many studies, such investment outperforms not only growth investment but the overall market performances as well. However, this approach would take investments periods of up to 5 to 10 years.
Value Investment Pitfalls
Value investing strategy is not for those who just want to earn a quick buck. Stocks that are cheap today, could stay cheap for a long time unless an external catalyst alters their standing. Therefore, investors need to carry out detailed checks on the fundamentals of a company before committing to it.
Such checks are known as fundamental analysis, which covers checks on the company’ management capabilities, financial standing, risk assessments, as well as the competitiveness of their business in the long and short term. However, such information is not easily available and new investors would find these research efforts a major challenge.
Should Investors Start to Adopt this Strategy Now?
Warren Buffet believes in being greedy when others are fearful and becomes fearful when others are greedy, he buys quality companies during a downturn, whereas other investors are fearful during these uncertain times. For the next 5 to 10 years, investors that follow a buy and hold strategy could consider starting entering the stock market because this bear market presents a rare opportunity to pick stocks at extremely low prices.
Furthermore, they could also adopt a Dollar-Cost-Averaging approach, where a person can put in a fixed dollar amount at regular intervals in a particular investment irrespective of its share price. This strategy will result in more shares being purchased at times when prices are low and fewer shares bought at times when prices are high.
Value Investment Courses
These courses are a great way to learn about different investment strategies. Just like how Graham learned from his teachers, these investment courses can help you to learn investment techniques from a seasoned investor point of view. A number of such institutes are available all over the world, especially in Singapore where value investing is trending now.