Individual investors often point to the long-term success of Warren Buffett as proof that value investing works. They are correct, and Buffett is just one example of the many long-term investors who have found success with value investing. While value investing works, many investors fail to succeed with this strategy.
I believe the reason value investing is so difficult to implement is because it is challenging to define exactly what "value" means. Some investors use the price-to-earnings (P/E) ratio and buy when the P/E ratio is low. Others search for stocks with low price-to-sales (P/S) ratio in their hunt for value. In addition to these two tools, there are dozens of other ways to measure value. In the right hands, and with enough time, any disciplined approach to value investing should work in the long term. (more)
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