The majority “investors” in the market purchase shares on hearsay, gut feel and recommendations from other “gurus”. They get excited and buy when prices are rising and are getting exorbitant.
Compare the above with value investors. Value investors buy shares after researching thoroughly by looking at the fundamentals of the company and don’t invest on hearsay. This is the first edge. They then put a margin of safety to the price they value the business at. This is the second edge. They also invest when there is a temporary one-off negative news in the company or when there is negative news involving world economics as these cause price to dip in the short-term. This is the third edge. They don’t invest in companies that they don’t understand or cannot value for the long-term. This is the fourth edge. They have a long-term view of the business and keep it for the long-term. They are not affected by short-term price changes and view the daily price changes as gibberish. This is the fifth edge. They are unemotional and are not affected when prices dip for the short-term as it allows them to purchase more at a cheaper price than before (provided the fundamentals of the company is intact). This is the sixth edge. They calculate the intrinsic value of the company before investing in it and through this, they know when to get out when the situation becomes exuberant. This is the seventh edge. All these edges and more makes value investing such a powerful tool for wealth creation.
In addition to all the edges discussed above, what other edges can you think of?