The Importance of Intrinsic Value

Feb 2019

When investors try to take advantage of investment bargains, there’s always a chance they’ll make mistakes such as mechanically equating low prices with bargains. There is much more involved in bargain hunting. Ultimately, investors need an ability to estimate the intrinsic value of a potential investment. For example, if your neighbor offers to sell you a dollar bill for $1.50, that’s not a bargain—even if he offered the same dollar bill to you yesterday for $2.00. In the final analysis, in order to take advantage of stock market volatility, it is important that investors be able to reasonably estimate the value of potential investments.