Guest Post: What Do Value Investors and Couponers Have in Common?

What
Do Value Investors (Like Warren Buffet) and Couponers Have in Common?
Guest
Post by: Sherri Gray, Certified Personal Finance Counselor®

Value investing is a strategy that
investors, like Warren Buffet (3rd richest man in the world), have been utilizing
for years, often beating the average annualized returns of the S&P 500. The
S&P 500 is an index of 500 stocks chosen for market size, liquidity and
industry grouping, among other factors. Companies included in the index are
selected by the S&P Index Committee, a team of analysts and economists at
Standard & Poor’s, and includes companies like Bank of America, Coca-Cola,
Costco, FedEx, and Tiffany & Co. just to name a few. So, beating this group
is a big deal.

How is value investing similar to couponing
you might ask? Well, if you’re a couponer, you know that one way to maximize
your savings is to combine a coupon with a product that’s on sale. And when you
do this, you can purchase products at a fraction of their original cost. And
when you can purchase a product at a fraction of its original price, you should
‘stock’ up and buy more than one of that product. That way you’ll have enough
of that product to last your family until the sale cycle rolls around and that
product is on sale again.

Value investing works in a similar way. There are several ways to invest and
one way is to purchase stocks from a company. A stock is a type of security
that signifies ownership in a corporation and represents a claim on part of the
corporation’s assets and earnings.

With value investing, in particular,
you want to make sure that a stock’s current market value (the price at which
the stock is currently selling) is less than its intrinsic value (the stock’s
true value). So, when the current market value of a company’s stock is priced
below its intrinsic value, you not only want to buy that stock but you want to
buy more than one of it. Keep in mind that you should only buy what you can
afford remembering that the ‘sale cycle’ for stocks will come around again giving
you another opportunity to buy.

The key to value investing is diligence and patience. So, if you’re a couponer,
you already possess these fundamental skills and are well on your way to
becoming a value investor. To learn more about value investing, refer to The Value
Investor’s Handbook
.

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