SMSF Investing Education & Strategies

DIY Shares - Value Investing Education

The concept known as "Value Investing" is one of the most widely accepted, logical sharemarket investment methods, and is a method followed by Warren Buffet - the man globally known as the worlds most successful sharemarket investor.

Value investing generally refers to the strategy of investing in shares of high quality 'extraordinary' businesses that you believe are trading for less than their intrinsic values, and hence you believe them to be 'undervalued'. This is predicated on the belief that the stock market overreacts to good and bad news, and this results in share price movements that are not consistent with the company's long-term fundamentals. This in turn results in an opportunity for investors to buy good quality businesses when the price is deflated. However, the main issue in value investing is estimating intrinsic value. There is no one "correct" intrinsic value, as different investors can be given the same information on a company and yet give it a different value. Therefore, the other central concept to value investing is that of "margin of safety". This means that you allow some room for error in your estimation of value by buying at a big enough discount. Bear in mind that the very definition of value investing can be subjective. However, despite the different methodologies, it all comes back to the same thing - trying to buy shares of the best quality companies for less than they are worth. In Australia, one of our most well known exponents of value investing is Roger Montgomery, and Roger supplies us with much of our value investing education in this section.

Videos

Presentations

Listen to Roger Montgomery's presentation (and view the slides) on Value Investing at The SMSF Review's Strategy day for charity, held on the 15th March 2011 in Sydney.

Click Here for the slides

Click Here for the audio

Roger Montgomery shares his step-by-step guide to valuing the best stocks and buying them for less than they're worth in his new book, Value.able, available exclusively at www.rogermontgomery.com. Roger also shares his stock market insights at this blog http://blog.rogermontgomery.com

Investors should obtain relevant and specific professional advice before making any investment decision. The information contained herein does not take into account the investment objectives, financial situation or needs of any particular investor. Before making an investment decision investors should consider, with or without the assistance of a licensed advisor, whether the information contained herein is appropriate in light of their particular investment needs, objectives and financial circumstances.

The articles herein contain the current opinions of the author only. The author’s opinions are subject to change without notice. This article is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of the author.