Generally, investing can be categorized into value investing( investment), and speculation. Value investing involves choosing a company which is said to be underpriced by fundamental analysis. Some criteria to be looked into when doing fundamental analysis are PER ( price to earning ratio), NTA ( Net Tangible Asset), Dividend Yields, Price to book ratio and so on. Some great investment gurus who practice value investing include Ben Graham and Warren Buffet. According to Warren Buffet who owns Berkshire Hathway, the share of a company is only worth to buy if the share's price is less than their intrinsic value. Intrinsic value is the value which a company should worth by looking at its fundamental data and future prospect. It is the value investing or intrinsic investing which bring Warren Buffet to be one of the world richest man nowadays.

Opposing to value investing is speculation or gambling. One of the difference between speculation and investing is the way to pick up a stock. Value investing ( intrinsic investing ) depends on fundamental analysis while speculation depends heavily on technical analysis. Technical analysis looks at the market behavior, analysizes the trend of a certain stock in term of price and volume, and predict the short term stock's price. Technical analysis can be useful even if you are practicing value investing. Technical analysis provides useful information to tell you what is the best time to buy a share and what is the best time to sell it.

It is highly recommended to practice value investing rather than speculation. Value investing provides higher safety margin and a lower risk while speculation involves higher risk. Something with higher risk will definitely promise a higher return, but you have to bear the risk of losing all your hard earned money. Looking at the behavior of some of the great investors nowadays, majority of them adopt to value investing. However there are also some investors who are famous with speculation such as George Soros (financial speculator).

For beginners who just started learning how to invest in stock market, value investing should be practiced.






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