The STRIDE Blog

4 Intrinsic Principles of Successful Value Investors

stride-4-intrinsic-principles-of-successful-value-investors-blogAll of us strive to become successful investors, but success doesn't come knocking at your door. You have to work for it, but luckily not as hard as you might think. What you need to do is apply the correct principles to your investment strategy, stick to it and you will soon be on your way to success.

All systems are based on principles. Applying a combination of these principles ensure the utmost efficacy. If you want the system to work for you, you should abide by its principles. Ignoring them will only lead to failure. Value Investing also consists of specific principles, that when applied correctly to your investment strategy, could guarantee market-beating results. 

At STRIDE we have developed a proven investing concept, 3D Value Investing, making value investing easy and effective for new and experienced investors. With a combination of substantial research and experience we have identified four principles that we strictly adhere to. You should do the same.

The Four Principles of 3D VI

Principle 1: Always Invest With a Margin of Safety

Investing with a margin of safety means buying a share at a price that is below its fair market value.

We look at margin of safety in terms of depth, based on the outcome of our fundamental analysis of a business. If the business proves to be strong, well run and generates superior returns, we are happy to settle for a shallower margin of safety. If our fundamental analysis casts doubt over the financial health of the business, the margin of safety must be much deeper.

Principle 2: Welcome Market Fluctuation

There are going to be times when the market is under stress. Instead of selling out and heading for the hills during a downturn, we recognise this time as one of great opportunity.

3D VIs form their own opinions of business value based on careful examination of financial facts. Once we have targeted sound, currently undervalued businesses, we buy. One day, the market will catch up with the fair value of that business and the price will swing up again to beyond our target exit point, a price that we’ve determined represents a great return. That is when we sell.

Principle 3: Know What Type of Investor You Are

Sticking to your investment philosophy will bring the most consistent results. As 3D VIs, we would never invest in any business without first applying our methods and processes to the financial facts.

We are not interested in following the market herd. Instead, the principles of 3D VI allow us to cut our own paths through the market based on opinions of which businesses to buy into or sell out of, opinions that are formulated on fundamental analysis and valuation. We also employ our specific investing principles to dictate the timing of buying in or selling out.

Principle 4: Portfolio Distribution

Don’t put all your eggs in one basket. A broad selection of intelligent investments across multiple sectors, geographies and currencies will further buffer a portfolio against risk. Maximum diversification equals minimum risk

Becoming a 3D Value Investor

As stated in the third of the 3D VI principles, knowing yourself as an investor is central to your success.
Becoming a 3D Value Investor is an active decision, one that should be made with full clarity of what 3D VI means and the mental approach needed to succeed.

Predominantly, being a 3D Value Investor means:

  • adopting a calm, level headed view of the market.
  • not acting impulsively or erratically when trends take an unexpected turn.
  • understanding that 3D VI allows you to make your decisions independently of market mayhem.
  • seeking long-term opportunities with businesses built on strong financial bedrock.
  • Buying and selling shares at the optimum times.
We are only interested in investing in businesses that demonstrate consistent strengths, either pay consistent, affordable dividends or generate significantly superior returns and have the means to withstand a severe economic downturn.

We are the antithesis of speculators or high-risk gamblers. Our investment choices are not influenced by geography, industry sectors or currency.  Regardless of market rumour, current trends or the panicked actions of others, we use specific processes to seek out investments representing the most promising prospects.

We reinvest our returns to maximise the positive effects of compound interest. Becoming a 3D Value Investor places control over your investments firmly in your own grasp.

The next blog in our "3D Value Investing" series will cover fundamental analysis, one of the three dimensions of 3D Value Investing.

Want to learn more about 3D Value Investing and the benefits it holds? If yes, get stuck into our Practical Guide to Value Investing eBook below.

 

STRIDE's practical guide to value investing for beginners: starting your portfolio 

Image has been altered. Photo credit: Matthias Rosenkranz via photopin cc

Topics: 3D Value Investing, eBooks

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3D Value Investing: Triangulating The Best Investment Targets

3D Value Investing uncovers the best businesses for investment, the fair value of those businesses and the best times to buy in and sell out. This approach to long-term investing results in higher returns with lower risk.

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