Value investing is a strategy that involves buying shares in businesses that you believe to be undervalued.
It’s a simple concept – if you think something is going to be worth more than it currently is, it will appeal to you if you’re a value investor.
It is more of a hands-on investment strategy with fund managers scouring the market, looking for the next opportunity. Almost by definition, they buck the trend and search for investments that others aren’t attracted to at that moment, and they look for signals such as when a company’s executives increase their own shareholding.
It’s riskier than more passive investment strategies because there’s always the chance that the predictions won’t materialise.
That’s why it can be sensible to use value investing alongside other strategies so that you spread the risk through a diversified portfolio.