1. While the methodology of value investing is popularly described as "concept of buying quality stocks that are undervalued", defining the words "quality" and "undervalued" is in the eye of the beholder.
2. If that wouldn't be so, PE & PB of Sensex (perceived to comprise of quality stocks) wouldn't have swayed between 13-25 & 2.6-4 during the last 10 years, and between 16-25 & 2.6-3 during the last 5 years.
3. Swings in midcap and smallcap indices during the last 3 years are even more significant, although they are supposed to be comprised of "quality" stocks too.
4. Also, a stock's intrinsic value can sometimes be even much lower than its stated book value, and as there's no "objective" system for estimating correct value of all businesses, the original "bargain" price may not turn out to be a good bargain.
5. Nobody can accurately determine whether an investor has bought a stock at its real worth, and such an exercise done by an average retail investor could invariably land him in a "value trap", both with "abysmal" companies and "overvalued" stocks.
2. If that wouldn't be so, PE & PB of Sensex (perceived to comprise of quality stocks) wouldn't have swayed between 13-25 & 2.6-4 during the last 10 years, and between 16-25 & 2.6-3 during the last 5 years.
3. Swings in midcap and smallcap indices during the last 3 years are even more significant, although they are supposed to be comprised of "quality" stocks too.
4. Also, a stock's intrinsic value can sometimes be even much lower than its stated book value, and as there's no "objective" system for estimating correct value of all businesses, the original "bargain" price may not turn out to be a good bargain.
5. Nobody can accurately determine whether an investor has bought a stock at its real worth, and such an exercise done by an average retail investor could invariably land him in a "value trap", both with "abysmal" companies and "overvalued" stocks.