Investing in stocks is quite risky if we don't do proper analysis. Stock prices can go up and down at any time. Even sometimes prices can go very low without any clear reason. One way to minimize the risk is by investing in mispriced stocks, i.e. stocks that are priced lower than their actual value (undervalued), rather than picking stocks only because of hype or positive trend. This strategy is often called value investing. The term value investing was first introduced by Benjamin Graham (the mentor of arguably the most successful and well-known investor of all time, Warren Buffet) and David Dodd in the 1920s. By investing in an undervalued stock, we expect the price to return to its fair price one day, so we will be less worried when it goes down. A lower price can even become an opportunity for us to buy more. Some Simple Valuation Methods Using Earnings There are various methods to measure stock valuation. Some of the simpler ways are involving the company's earnings, su...
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