Those who wants to earn money from the stock market and be well on their way towards a nice retirement without taking large risks are advised to look into value investing in Singapore. If used properly, the value investing strategy helps you to safely trade using a basic proven formula, which offers lower risks but larger returns over time.
Locating value stocks that are being traded below their intrinsic value is the core concept of the value investing strategy. In simple words, you need to find well-established companies that have temporarily dipped in the stock market but have a good trade history. When that company bounces back, you will have valuable stocks on your hands that can be traded out for a profit.
However, you need to do some strong research in order to find such stocks, and not only low stocks. Cheap stocks are not always a great investment and in fact, most of the times buying cheap stocks is a giant risk because not every startup company will perform like Apple.
Rather than blindly looking at only the price, you are advised to buy cheap stocks of companies that have powerful historical performance in the form of dividends, cash flow, book value and revenues.
McDonald’s is the best example because it was a powerful stock that dipped in the 90s with a strong track record. People who used value investing techniques during the nineties period when stock values dipped are now sitting happily on a cashed out investment or holds a solid position in the stock market.
Of course, you will need to stay up to date on the business news so as to know if it’s a risky or safe dip, because if the shares are dropping due to a fundamental problem, it may not be a smart choice even if their paper value is low.
When purchasing stocks, consider every purchase as making you a part owner of the company, focus on the overall value of the business instead of external factors to see how value investing can pay out.