1. What is Value Investing?

The difference between value trading and value investing

The difference between value trading and value investing is that value trading involves exchanging items for those with higher values, while value investing entails holding an item or asset that grows in value over time.

The difference between an asset and liability

• Asset: something that put money into your pocket
  • e.g.: apartment building (house is not!), patent, job
• Liability: something that takes money out of your pocket
  • e.g.: cars

Who created value investing

• Benjamin Graham, professor at Columbia University, initiated the notion of value investing
• Warren Buffett was taught from him, mainly influenced by his books: Intelligent Investor and Security Analysis
• After looking at the financial data of a company, warren thinks about the fair price of a share (intrinsic value) and compare with the market price.
  • Depending on this comparison, he decides whether to buy this company.

Key Terms

Value Investing, Assets, Liabilities, Intrinsic Value