What makes an retail investor and trader different from value investor?
Retailer investors and traders make investment by looking at price data, candlesticks, various indicators and breaking news, value investors invest by following the rule of Intrinsic Value and Margin of Safety.
Intrinsic Value
It is the discounted value of cash that can be taken out of a business during its remaining life - Warren Buffet
In other words, it is to see if a business is currently out of favour with the market and is really worth more than its current valuation.
Margin of Safety
This serve as a safety net for value investor to gauage if they want to invest in a company looking at the safety margin. The higher the Margin of Safety, the less risk and more assured we are.
Personally, I find these two pointers very critical and useful. Unlike trading, they look indicators to determine whether to enter or exit. Frankly, these indicators do not mean anything.
That is why I choose to be a value investor !! :)
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