Which Type of Value Investor Are You?

In my decade-long journey as an investor, I realised that most value investors can be classified into three main group. Which group do you feel more connected to?

Deep Value Investors

This is the group I see most people start out as. This might be due to the influence of the father of value investing, Benjamin Graham. His books, “Securities Analysis” and “The Intelligent Investor”, both talk about finding stocks with a huge margin of safety before buying.

This might have made many investors focused on stocks that are “cheap” based on quantitative measures. These are the group of investors who hunt for stocks with ultra-low Price to Book or Price to Earnings. They believe that if they are able to find these stocks and buy them at a huge discount to their intrinsic value, they would be able to compound their wealth as the value of these companies become realised in the market.

The small and mid-cap space is great starting place for these investors to hunt for stocks.

Dividend Investors

These are the investors who have the mantra: “Show me the money.” They want to invest in companies with stable dividends which will provide them with a stable cash flow to either feed their lifestyle or allow them to reinvest regularly.

Companies in industries such as utilities, consumer staples and real estate investment trusts are attractive places for them to hunt for stocks.

Growth Investor

These investors focused on the future. They want to look for companies that have huge potential in the future and would continue to grow for many years to come.

As the value of the companies they invest in are still years before it might come to fruition, these stocks tend to trade at relatively high valuation.

You Can Be A Little Of Everything!

You might see yourself leaning towards one group of investors. That would be great as you know what type of companies suit your personality more. However, there is no restriction in investing. In fact, you can always try to be a little of everything. Personally, I tend to invest in a wide selection of companies across different investment strategies. So, call me a deep-dividend-growth-value investor, please.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.