3 Ways To Educate Yourself About Value Investing In The Stock Market

7 July 2016
 Categories: Finance & Money, Blog

If you're tired of letting your money sit in a cash account, or in an index fund, and would prefer to take a more active role in investing, then you need to educate yourself. It could be a disaster to simply pick stocks at random. You want to understand terms such as P/E, EPS, BVPS (book value per share) and lots of other technical info. You also want to understand what makes a company (and it's stock) valuable over another. Just because you like a product, doesn't mean you should buy the stock. The information listed bellow will help you figure out how to move forward with value investing. One is a book that is considered a classic in value oriented investing. The second is a recommendation for televised media, and finally there is a specific, value oriented stock market newsletter service.

The Fundamentals

The king of value investors is Warren Buffett. He buys shares in companies that he believes are a good value. He is not someone who day trades, and he doesn't look to purchase tiny penny stocks that might net a gigantic return. If you look at his portfolio it is filled with huge blue chip stocks (Wells Fargo, IBM, etc…)

If you want to learn the method he uses, then you need to read the classic book on value investing The Intelligent Investor. Warren Buffett calls the author, Benjamin Graham, his idol. The book lays out the foundation to know what value looks like. It helps you understand the terms (P/E/, EPS, BVPS) and more importantly, how to spot them and figure out if they indicate a good buy. The book is quite old, but the advice in it is still fundamentally sound.

The Broad-based Financial Media

You need to start watching the financial news networks. The primary one is CNBC. They run interviews with analysts, as well as interviewing company C.E.O.'s and others throughout the day. At night they analyze the data for the day and then go over the upcoming events for the week. Watching these shows will help you get a big picture of the market as a whole.

The Targeted Analysis

The final piece of the pie is to subscribe to a stock investing newsletter that is geared towards value investing. These newsletters can discuss in-depth value investing whereas the broad-based media has to cover everything financial. For example, much of the programming on financial news shows might concern commodities, options, bonds, or political regulations and government released financial date (BLS employment numbers, GDP, etc...). These are all important to understand for the value investor (especially political regulations and financial data), but they are not in-depth about value. In order to get in-depth analysis you need a specialized newsletter. They will often highlight particular companies and do a complete breakdown on their balance sheets and projected growth. It's an invaluable tool for the value investor.