What Is Value Investing?

Value Investing is an investment strategy that has consistently delivered strong returns for disciplined investors over the long run. It was developed by Benjamin Graham, who began shaping the philosophy through his investing career and teaching at Columbia in the 1920s, before formally codifying it in his 1934 book Security Analysis (co-written with David Dodd) — later popularized further through his 1949 book The Intelligent Investor.

→ Related: Warren E. Buffett’s Best Pieces of Advice for Investors(#15) — Buffett studied directly under Graham and remains value investing’s most famous practitioner.

Think of it like a sale at a mall — when something you want goes on discount, you’re inclined to grab it. Value Investing applies the same logic to stocks: it encourages buying shares that are trading at a discount to what they’re actually worth. These are known as undervalued stocks.

Some Key Concepts Before You Start

Price vs. Value — these are not the same thing. Price is what you pay; value is what you actually get.

Every company has its own intrinsic value, determined by its financial strength and future growth prospects. A company’s share price, on the other hand, is set by the market — and can trade below, above, or right at its intrinsic value at any given time.

→ Related: How to Find the Intrinsic Value of a Share/Stock(#14)

Value investing is built around buying a stock specifically when its market price sits below its intrinsic value.

In value investing, market ups and downs aren’t treated as pure risk — they’re treated as opportunity. Conventional thinking often frames volatility as inherently risky, but value investors see it differently: those swings are what create undervalued buying opportunities in the first place.

→ Related: Who Decides the Price/Value of Shares in the Share Market?(#4)

Over the long term, a stock’s price tends to track its intrinsic value. In the short term, price can drift meaningfully above or below that value — but value investors expect it to eventually correct back toward it.

Example: if a company’s intrinsic value is $100 but it’s currently trading at $50, the expectation is that the price will eventually rise back toward $100. Conversely, if the same company were trading at $200, the expectation is that it would eventually fall back toward $100.

Calculating a company’s intrinsic value is a skill in itself — one worth developing directly rather than skipping.

What it takes: patience, discipline, and the conviction to hold (or buy) when the broader market sentiment says otherwise.

Recommended Reading on Value Investing

The Intelligent Investor by Benjamin Graham remains one of the most influential books ever written on the subject — widely considered essential reading for anyone serious about this approach.

→ Related: Bestest Books to Read on Investing(#66) — for more recommendations beyond this one.

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