CRISIS TO OPPORTUNITIES IN THE STOCK MARKET (Principles Of Value Investing)
Other people are saying that investing in the stock market is risky. Some have lost a lot of money investing in stocks and swear they will never touch stocks again.
They lose money not because of the volatility of the market but mainly because their fundamental strategy for investing is flawed.
They ask the wrong questions, like which stock is going to fly then enter the market based on tips, news and speculation.
They seek short term gains. They don’t do their own study because they really have no idea how to do it.
They’re the same ones who brag about how much money they make, become greedy, then end up losing big. No wonder they find that investing in stocks is risky!
The Value of Investing
In Value Investing, we ask the right questions and make our decisions from a Business Point of View.
We only buy a business when it makes business sense to do so. We are not traders, we are investors.
In the stock market, there are two types of businesses for purchase – Healthy and Sickly Business. Healthy businesses perform well and earn good consistent profits for its owners. Sickly businesses produce sickly profits that are poor and erratic.
When times are bad or when economic conditions are unfavorable, both Healthy and Sickly businesses will fall ill. Their earnings may drop sharply, stock prices will fall.
You have a perfect opportunity to turn times of crisis into opportunities by buying the stock of healthy businesses at low prices during this time.
Healthy businesses have a higher chance of recovery and when they do, they will continue to perform, recoup their losses and earn good profits for the owners.
Sickly businesses on the other hand may not recover from bad times. Even if they do, they will continue to do poorly and produce anemic results.
The real key to success is having the ability to differentiate between the 2 types of businesses.
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