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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