If your goal is to secure your future financially, you have to accumulate wealth.  And when you want to accumulate wealth, you have to carefully invest your hard-earned money.

Of course, Kinds of Derivatives around the market, it’s easy to find promises of quick money.  Most of the time, they tell you that the stock market is the answer.  You just have to buy a security at a lower price.  Wait for it to increase in value, and then you sell it.  The problem is you don’t really know if it’s actually going to rise in value or not.

That’s speculating.

What about Value Investing?

Meanwhile, Derivative Trading value investing is buying securities after an extensive and thorough research with the goal of holding them for a very long time.  It might also involve continuous dividends and profits on the increasing value of the stock in the market.

Through value investing, you buy quality stocks at a lower price than their intrinsic values, which is determined by looking at the financial statements of the company.  Such statements include balance sheets, income statement, cash flow statement et cetera.

Research

Before you buy the stocks of any company, you should do a thorough research about the company.  Most of the information you need has something to do with their financial health, but there is also stuff like plans.

  • Long and short-term earnings
  • Long-term business plans
  • Business model
  • Financial structure

Value investing focuses on companies that can pay dividends.  And because of that, it will only be possible for the company if it is earnings profits and is financially sound.  You have to conduct a thorough research to get these things clearly.

Diversification

Successful investors have different types of investments in their portfolios.  Investing all your money in one basket can result in tremendous losses if the company suddenly meets bad fortune.

With diversification, you can lower the risks of losses.  Even if one or two of your investments go out of business, you won’t have to worry about losing all your money.  You have other investments that could minimize or even offset the losses you incurred.

Safety Margin

If you want to further avoid the risk in value investing, you must always buy stocks with a margin of safety.  The margin of safety is what you get when you subtract the price you pay for the stock to the stock’s intrinsic value.

The higher the margin of safety, the safer your investment is.  Higher margin of safety also means higher potential profits.

Patience

Value investing requires you to hold the securities for a long period of time.  It goes without saying that you have to be extremely patient.  The market is naturally dynamic: it could be doing well in one instance, but just turn your back a bit and it would be falling.

In any case, you will be tempted to sell the securities to make a profit and avoid future losses respectively.  You must have to ability to control these temptations.  You have to remember that value investing is the best money-maker.

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