7 Things that Make Value Investing Successful in the Long Run

4 min read · September 24, 2020 3727 0
Investing Successful in the Long Run

There are two types of stocks, growth and value stocks. The former are stocks that offer a growth rate above the average, while value stocks are undervalued stocks. Surprisingly, value investing is an often ignored area of investing that not many individuals like to venture into. By definition, value investing refers to purchasing stocks when are they are below their actual value and holding them for the long run. Value investing is a lot like buying something at a discount. However, there is still a lot of skepticism and hesitance surrounding it. So, before you decide to invest in value stocks, you must know what makes these stocks a profitable option.

Here are 7 things that can make value investing successful in the long run:

1. Keeps the financial anxiety out

The fear of fluctuating prices can be a cause of worry for many people. Value stocks are undervalued at the time of purchase but they are built to perform better in the long-term. Many investors commit the mistake of selling their stocks at the slightest shift in the market. But it is essential to hold your stocks for a relatively larger time frame. Keep in mind that the market will continue to fluctuate but this should not be a reason to panic.

2. Does not require active and aggressive investment practices

Since the stocks are bought at a low price, value investing requires very little capital to begin with. You can start investing in value stocks at a very early stage in your career. This also allows more time for the power of compounding. Moreover, since this is a long-term investment approach, you do not have to be bothered by short-term market volatility. Value stocks are a simple form of investing that need little to no intervention. However, it is important to know that value stocks are ideal for goals set in the future. If you are investing in such stocks with the intention to cover immediate or mid-term goals, this approach will likely fail. One of the most necessary virtues of a value investor is patience.

3. Works on the principle of the margin of safety

The margin of safety refers to the difference between the actual or intrinsic price of a stock and the price at which you buy it. For instance, if a stock’s current cost is $5 and its intrinsic value was $7, the margin of safety for this stock is $2. The higher the margin, the more beneficial is the investment. As a value investor, it is crucial to find and put your money into companies that offer a good margin of safety. It is also vital to differentiate between a company that shows potential in the long run and one that is simply showing signs of downfall. It can help to conduct thorough research and understand the past and current financial standing of the company before buying any stocks. You must focus on the company’s long-term plans too. You can also consult a financial advisor in this regard.

4. Focuses on the business and not the stock

One of the primary factors that make value investing successful is that it is centered on the business rather than the stock. Value stocks are relatively unphased by the happenings of the stock market. The returns from your investment will depend largely on the performance of the company. While you may find looking up companies a time-consuming process at first, you will end up saving a lot of time that is otherwise spent on buying and selling of shares in the stock market.

5. Does not require diversification

While most other forms of investing stress upon the need for diversification, value investing is a little different. Opportunities for value investing do not come by as quickly as others. On most occasions, you will invest in value stocks and have to wait several years for the power of compounding to generate good returns. Hence, financial experts suggest buying large amounts of undervalued stocks at once, even if they are of the same company. While this may be seen as a high-risk move in traditional investing, it is usually encouraged in value investing.

6. Dwells on the reputation of a company

Unlike the share market, value stocks are more driven by the management of a company rather than other market forces. Finding a company with a competent team of managers can be a foolproof way for you to ensure favorable returns later. Understanding a company’s core principles, management styles, and credibility can enable more successful investment decisions.

7. Offers low risk and costs

Value investing is a relatively low-risk strategy. Value stocks are not impacted by price fluctuations, supply, or demand. The need to time the market and buy and sell stocks frequently is also removed from the equation, thereby reducing the overall risk component. Moreover, the taxes and costs incurred in value investing are also a lot less than short-term investing.

To sum it up

Value investing is a great strategy for passive investors who do not have the time and interest to time the market periodically. They require very little attention and you only need to look at the market when you buy and sell them. All other fluctuations will have no consequence on your returns.

In order to know more about value investing, you can reach out to a financial advisor.

WiserAdvisor Insights

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. We believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.

Related Article

8 min read

18 Sep 2025

5 Step Guide on Building Wealth

By the time you reach the midpoint of your career, the financial landscape changes. Instead of starting to save, the urgency is more about making your money work harder, faster, and more predictably. Retirement is now a visible point on the horizon, and thus, every decision now carries more weight as the margin for error […]

10 min read

16 Sep 2025

Wealth Creation vs Wealth Preservation: What Matters Most as You Near Retirement

In your 30s and 40s, the financial conversation often revolves around maximizing returns, growing your portfolio, and building momentum. But by the time you reach your 50s and early 60s, a different question takes center stage: How do I protect what I’ve built? That’s where the distinction between wealth creation vs wealth preservation becomes strategic. […]

10 min read

05 Sep 2025

Everything You Need to Know About Balanced Funds

Convenience, thy name is mutual funds! Mutual funds have really simplified how the world invests. Gone are the days when building a portfolio meant spending hours handpicking individual stocks and bonds. You had to keep one eye on market news and another on price movements, while still finding time to decide when to buy or […]

9 min read

04 Jul 2025

What are the Tax Brackets and Federal Income Tax Rates for the 2025-2026 Tax Year?

Did you know that the Internal Revenue Service (IRS) adjusts 2025 tax brackets to account for inflation? Yes! The numbers you saw on your 2024 return probably will not be the same in 2025. These changes can affect how much tax you owe and whether you are eligible for certain tax credits or deductions. But […]

More From Author

14 min read

23 Jan 2024

How to Determine If Your Financial Advisor Is Doing a Good Job Each Year

The decision to hire a financial advisor is a prudent move. Seeking professional advice can provide valuable insights and a roadmap to achieve your financial goals with strategic planning. But the world of financial advice is crowded. While some advisors bring qualifications, expertise, and a commitment to your financial well-being, others may fall short of […]

4 min read

30 Oct 2023

How to prepare for a meeting with your Financial Advisor

What do you do before you visit a doctor? Understand your condition, prepare for all the questions that the doctor would ask, ensure all your test reports and medical history documents are in order and so on. Preparation is a must even before you visit a financial advisor.  Table of Contents7 Things to do to […]

3 min read

26 Jul 2019

Best Retirement Calculators to plan Retirement

It is said that a goal without a plan is just a wish. This holds true even for retirement planning. You dream of a peaceful retired life. To achieve that you must plan for your golden years well in time. Various retirement tools make your task easier. For example, a retirement calculator helps you calculate […]

4 min read

23 Mar 2020

How to get rid of Money Anxiety?

Is money anxiety even a thing? Yes, it is! Money anxiety is something we all have dealt with or are likely to deal with at some point in our life. Sometimes, you may not even know that you are money anxious unless you take note of it. But the good part here is that money […]

Subscribe to our
newsletter & get helpful
financial tips.

By clicking "Subscribe", you agree to the terms of use of the service and
the processing of personal data.

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice. A professional financial advisor should be consulted prior to making any investment decisions. Each person’s financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.

close circle

Still Have Questions About Your Finances?

Get Matched with a Trusted Financial Advisor Today

trusted Trusted by millions of
consumers since 2004

Start Your Match Now Completely Private and Confidential