A value stock can also be defined as a security dealing at a lesser price than how the company’s performance may otherwise indicate. Investing in value stock totally worth the time it takes in investing in it. Highlighted below are 5 benefits derived from investing in value stocks.
1. Owners of value stock takes advantage of the growing economy. In that as the economy grows, earning from stocks also grow. This is because economic growth leads to increase income. Increase in income will increase consumer demand, driving more revenues into the company’ cash registers.
2. Owning a value stock is one of the best ways of staying ahead of inflation. Traditionally, stocks have averaged an annual return of 10%. This is far better than the average annual inflation rate of 3.2%. This does mean that value stock owner must have a longer time horizon. That way, they can buy and hold their stock even if the value temporarily drops. To understand this, you can do a little comparison of stocks, inflation, and gold prices in Gold Price History.
3. value stocks
are easy to buy. The market makes it easy to purchase stocks from companies. You can buy them through a broker, a financial planner, or even online. All you need do is set up an account, and in few minutes you can buy stocks.
4. Investing in value stocks offer two ways of making money. Majority of the value stock investors intend to buy low and then sell high. These investors invest in fast-growing companies that appreciate in value. This is attractive to both day traders as well as buy-and-hold investors. Where day traders take advantage of short-term trends, buy-and-hold investors expect to see the company’s earnings and stock price grow over time. Both classes of investors believe their stock-picking skills allow them to perform better in the market. Other investors prefer a regular stream of cash.
5. Value stock are very easy to sell. The market enables any investor to sell his/her stock at will at any time. This makes it easier in the case of sudden need of cash. However, doing this may force investors to take a loss since prices are volatile.