VALUE INVESTING- PART II: 5 Advantages of Value Investing

INVESTOPAPER, BHAWANA NEUPANE

In the first part of our article, we discussed value investing as one of the most prolific methods to succeed in the stock market. In this article, we will discuss the advantages of value investing.

  1. Low risk

    Value investing involves low risk. This is because value investors look for less valued stocks that have good potential to grow in the future. The price at which they pick the stocks i.e. the intrinsic value of the stock is higher than the market value. So, the value investors will profit in the long run after the investors realize the actual valuation of the stock.

  2. Consistent return

    Value investing assures you a good return on your investments. Value investors pick blue-chip stocks and they are driven by the company with good dividend history while picking stocks in their portfolio. On the other hand, they also go for growth stocks with huge potential that can beat the market return in the long run.

  3. Diversification

    Value investing is the best way to diversify your portfolio. It is not safe to place all the eggs in one basket. So, value investing allows you to mix different sorts of stocks and make rational investment decisions.

  4. Emotional Stability

    Value investing helps you to become emotionally stable. The market cycle is not predictable. So it is better to prepare for the worst and take advantage of the good market situation. Being emotionally stable is very important to make wise investment decisions. Value investing assures good stability because investors can always be optimistic in the different market situation.

  5. Long term approach

    Value investing gives you a long term approach in stock investment. You have to face different market cycles in the investment phase. So, value investing is the best strategy to take advantage in both the bull, bear or stagnant phase of the market.

In the present market context, Nepal Investment Bank, Mega Bank,  Chilime Hydropower, Butwal Power,  Shikhar Insurance, Siddhartha Insurance, etc. could be good stock picks for future gains.

ALSO READ: PART I: WHAT IS VALUE INVESTING?

 

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