“Value Investing” is a concept first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928.
The basic idea is to invest in companies that appear to be trading for less than their true value.
It requires solid research into a company’s fundamentals.
This strategy has been effective for people like Warren Buffett who popularized the idea of Value Investing for an entire generation of individual investors.
But a high-end asset management firm now says they believe this trusted “formula” no longer works.
In fact, their analysis suggests that value investing might be dead.
What’s The Story?
We’re not delving into the nitty-gritty details of their analysis. If you’re up on investing strategies and comfortable with financial analysis jargon, the article above is an interesting read.
We’re more interested in how this affects you as an individual.
So our take on this is twofold:
- We believe that “Value Investing” — at least as it applies to investing in the stock market — is dead. In fact, it has probably been dead for a long time.
- We believe that “Value Investing” still exists, however. It’s just NOT in the stock market. Instead, it’s about investing in and expanding two other forms of valuable capital you already have.
Here’s Why We Believe Traditional Value Investing Is Dead…
As we mentioned, Benjamin Graham and David Dodd developed the idea of “Value Investing” at Columbia Business School back in 1928.
At the time, the only people investing in the stock market were institutional investors. These were professional traders who managed pension funds or insurance company investments.
They not only understood what was required to make the strategy work, they also had 3 things that we, as individual investors, don’t:
- Massive liquidity, with consistent streams of regular cash flow coming in
- The ability to invest forever without needing to withdraw money for an unexpected expense
- A solid plan backed by the time, team, and expertise to make it work
A professional who invests in the market for a living or for an institution never has to pull money out for a large expense (e.g. a medical emergency, divorce, college, wedding, etc.)
Nor will they find themselves in a panic if the market drops, because they aren’t emotionally tied to the invested money like an individual investor is.
But Wait, Value Investing Has Worked for Individuals Too, Right?
It’s absolutely true that some individual investors have had success “copying” Buffett’s Value Investing strategy.
But the fact is, most of them are NOT doing most of the deep research themselves. In fact, many individual “Value Investors” simply mimic the trades Buffet makes, and try to ride on the shirttails of his success.
It’s an uncomfortable place to be when you are relying on someone else for your success. Especially if the new analysis proves true — and the traditional “Value Investing” model breaks down.
A Better Model For Individual Investors
Here are the facts about individual investors…
Everyone has different strengths, experiences, financial values, risk levels, passions, and levels of understanding concerning different types of investments.
That’s why it’s irresponsible — and even dangerous — for us or anyone else to recommend a specific investment to you or anyone else as if it will “work for anyone.”
Many people think mutual funds solve that problem. But only if you want zero control and pathetic returns.
Besides, even if you find a fund with the best manager possible, their hands are tied by the specific directives in the fund charter. So even if they see a huge loss coming your way, they may not be able to change course.
The fact is, no one is as concerned about your money as you.
So what do you do?
At Wealth Factory, we believe that you should first invest the time to figure out what your “Investor DNA” is.
Once you have a handle on it, you can confidently invest in things that make sense to you and you understand.
Investor DNA Starts Here…
We have specific tools that help you investigate and determine your Investor DNA.
And it all starts by exploring and exposing 2 forms of “hidden” capital that every living person already possesses.
They are called “Mental Capital” and “Relationship Capital.”
Identifying and clarifying these 2 forms of capital is the first step to uncovering and tapping into your Investor DNA.
Doing so not only helps you make more money with your investments, it actually frees up more time in your life.
“Value Investing” With The Financial Freedom Formula
Garrett Gunderson just released a new free course called the Financial Freedom Formula.
The course shows you exactly what “Mental Capital” and “Relationship Capital” are. You’ll discover how to identify how much of these forms of “capital” you already have, and how to expand them.
This is where you create value for the world.
The crazy thing is, when you invest in creating more value in the world, money starts flowing in. As Garrett likes to say, “dollars follow value.”
And when you create more value within the right system, it can make Warren Buffet’s returns look tiny in comparison.
This is true “Value Investing.”
And it’s all revealed in Garret’s new Financial Freedom Formula.
For the next week, you can get in on this training for free.
Most people are only one or two steps away from the next level of prosperity in their lives.
The fastest way to get what you want is with better information and by meeting new people.
The Financial Freedom Formula hands you the keys to do both.
Build the life you love,
The Builders at Wealth Factory