Value Investing: Why are investors shunning the art?
World over, investors have been practicing art of “value investing” since ages. However, not anymore a certain section of our proud investors fancy the same idea that produced millions for them. Why? What makes them so much disinterested in the idea? Isn’t it profitable anymore to follow the rules of the game or is the art dying a silent death?
Despite fund managers talking at high decibel about merits of value investing, very few walk the talk.
One of the manager I chanced to meet some days back told me “it takes lots of determination, to go about with the strategy in the bourses of today,” when asked the same question.
Informing about the reason why investors don’t use value investing strategy anymore because the stocks that they had considered carry poor tales with them – enough to detest the option. People find such options difficult to purchase as they carry depressed prices.
Highly admired stocks have high prices, motivating stories associated with them whereas non-performing ones have low valuations. However, with time, good stocks start commanding high prices and over the span of time, the excitement around these stocks end and investors are left with losses – remember tech boom, power sector boom!
Although, an investor with a head firmly on his shoulder will always go for admired stocks, less-admired stocks are a better bet for many reasons. However, it requires determination to buy a stock that has been much despised – going against the popular trend.
One of the examples where ‘wise’ men booked losses despite going as per the popular trend is the Initial Public Offering (IPO) issued by Reliance Power. Despite people oversubscribing the issue after stock promised good returns in the fancy power sector, huge crash was witnessed on listing. They paid huge premium without any safety net. The story ended badly.
So, value investing may appear a mundane art of trading, it’s the only way to keep growing wealth in stock markets. It’s the right time you also start learning rules of the game.